Retail’s Second Act: What the Lease Data Shows

Sometime around 2019, the financial press settled on a story: e-commerce had killed the shopping center, and the corpse would take a decade to bury. Headlines catalogued anchor bankruptcies — Sears, Toys “R” Us, JCPenney — as evidence of a structural extinction event. Investors priced retail REITs accordingly.

The lease data told a different story. Then, as now, anyone tracking actual signed rents could see that well-located retail space was not dying at all. It was being repriced, retenanted, and — in the best locations — bid up.

The vacancy nobody expected

Strip-mall and shopping-center vacancy in the United States has fallen to some of the lowest levels ever recorded — in many markets, below 5 percent, a figure that denotes a landlord’s market by any historical standard. Open-air centers, the unglamorous workhorses of American retail, are effectively full. The space that failed was a specific vintage of enclosed regional mall in secondary markets — real distress, but a fraction of the retail footprint.

What happened is straightforward supply and demand. Almost no new retail space has been built in fifteen years; construction starts for shopping centers remain a rounding error compared with the 2000s. Meanwhile, demand for physical locations kept growing — not despite e-commerce, but partly because of it. Digitally native brands discovered that customer acquisition costs online had risen past the cost of a store lease. Warby Parker, Allbirds, and hundreds of others opened shops. Service tenants — medical clinics, gyms, restaurants, veterinary practices — backfilled the apparel boxes. The tenant mix changed; the rent roll didn’t collapse.

Rents confirm the recovery

With vacancy this tight, basic economics took over. Asking rents for prime open-air retail have climbed steadily since 2021, and in supply-constrained coastal and Sun Belt markets, landlords are achieving rents well above pre-pandemic levels. Perhaps more telling: tenant improvement packages — the concessions that ballooned during the distress years — have compressed. When landlords stop paying tenants to occupy space, the market has turned.

The grocery anchor remains the industry’s bedrock. Centers anchored by high-performing grocers trade at the tightest cap rates in retail real estate, and grocers themselves have expanded — adding prepared foods, health clinics, and pickup infrastructure that drive foot traffic landlords can monetize across the rest of the center. A signed grocery lease is still the single most bankable document in neighborhood retail.

What the data misses — and what it gets right

None of this means every retail property thrives. Enclosed malls without a redevelopment path continue to struggle, and the bifurcation between prime and secondary retail mirrors what happened in office — the best assets pull away while the weakest face conversion or demolition. Regional variation matters enormously: Sun Belt retail, fed by population growth, looks nothing like retail in shrinking Rust Belt metros.

But the aggregate picture is unambiguous, and it has been for years: American retail real estate, measured by the only metric that ultimately matters — the rent tenants agree to pay — staged one of the quietest comebacks in commercial real estate history. The apocalypse narrative persisted because bankruptcies make better headlines than lease signings.

For anyone underwriting, brokering, or investing in retail space, the lesson is permanent: watch the lease rates, not the headlines.

The category-defining name in commercial lease intelligence — commercialleaserates.com — is currently available for acquisition by the firm positioned to own this data.