U.S. shopping centers have proven extremely resilient, having withstood e-commerce disruption, a global pandemic and the fastest increase in interest rates in decades. As we enter 2026, the recent strong performance of these retail centers has suddenly made them one of the most in-demand investment sectors in commercial real estate.
With more investors chasing a limited supply of for-sale retail assets, and a relatively bullish outlook for interest rates, shopping center pricing looks poised to hit record highs in 2026.
Investment capital that's targeting retail assets has expanded dramatically. In 2025, 28 retail-focused investment funds were launched, raising a combined $4.5 billion, the largest total since before the Great Recession and more than six times the amount raised in 2024. But this raised funding understates the true level of investment capital, as nearly half of these funds have undisclosed targets.
At the same time, institutional investors, who have largely avoided retail property for more than a decade, have come back in force as the office and multifamily sectors face mounting challenges.
Traditional shopping center buyers, such as publicly traded retail REITs and private investors, also remain active on the hunt. REIT’s continue to prefer acquisitions over new development, when possible, as it often remains a more advantageous use of capital. Private investors have historically been responsible for more than half of retail property sales activity, and they continue to compete aggressively for assets.
This surge in capital targeting the retail property sector coincides with a notable increase in transaction activity. Total sales of large shopping centers in 2025 are expected to surpass 2024 levels, with 1,303 transactions completed in the first 11 months of the year, compared to 1,344 in all of 2024.
Better fundamentals
A significant factor behind the increased interest in retail shopping centers is the considerable strengthening in retail property fundamentals over the past several years. Despite periods of volatility and an increasing number of store closures, diverse tenant demand supported by expanding retailers in the off-price, discount, fitness and experiential categories has quickly absorbed the majority of space vacated by retailer bankruptcies.
At the same time, demand from food and beverage, healthcare and personal services tenants has pushed small-shop vacancy to its lowest level in over two decades.
This ongoing demand has supported the fastest five-year rent growth period since 2007, driving average retail rents to record highs and creating significant mark-to-market opportunities as pre-pandemic leases roll. The retail rental rate dynamics have fueled outsized increases in net operating income for shopping centers, which is at the core of the investment appeal for retail centers.
While demand for shopping center space has accelerated, supply remains limited. Years of minimal construction and a persistent gap between replacement cost and in-place values have left few shopping center assets available for sale.
As of late 2025, only 767 shopping centers exceeding 50,000 square feet are listed for sale nationwide, comprising 460 neighborhood centers, 72 power centers, 232 community centers and 15 lifestyle centers.
When compared to the 1,303 shopping centers that had sold into late December 2025, the imbalance becomes clear, with the current inventory of for-sale properties representing barely half of annual sales volume. This shortage is particularly challenging for institutional buyers seeking scale. Large-format centers, especially grocery-anchored properties in Sun Belt and suburban Tier 1 markets, are highly contested.
Some investors are expanding their search out to secondary markets, shadow-anchored centers, or power centers, but even these options are limited.
The imbalance between demand and supply of retail space, and rising net operating income, is already evident in pricing. The average price per square foot paid for shopping centers over 50,000 square feet reached $142.23 in 2025, up from $125.11 in 2024 and well above the five-year average.
Lifestyle centers recorded the sharpest increase, climbing to an average of $277.56 per square foot. While these are national averages, many centers have recently traded for significantly higher values. There have been 81 shopping centers over 50,000 square feet that have traded for more than twice the average thus far in 2025, compared to just 53 last year and 40 in 2023.
The convergence of strong fundamentals, limited supply and unprecedented levels of investment capital creates an environment conducive to continued pricing escalation for shopping centers. If inflation remains contained and consumer spending holds steady, 2026 looks likely to mark an all-time high in pricing for large retail centers.