Key Points
A version of this article first appeared in the CNBC Property Play newsletter with Diana Olick. Property Play covers new and evolving opportunities for the real estate investor, from individuals to venture capitalists, private equity funds, family offices, institutional investors and large public companies. Sign up to receive future editions, straight to your inbox. The U.S. retail market started 2026 on relatively healthy footing, and investors, especially institutional investors, are starting to pay more attention. Retail appears to be moving from a story of recovery to one of scarcity. More stores closed or downsized than opened or expanded during the first quarter, according to a report from JLL, a commercial real estate services and investment management firm, but vacancies are still low at just 4.4%. That is because there has been very little new construction in the sector. Retail also offers much better yields than other commercial real estate sectors. And that’s why investors are returning, with transaction volumes reaching over $15 billion during the first quarter, an increase of 5% compared with Q1 2025, according to the report. It was the highest first-quarter transaction volume since 2023. “The alpha wolves are back, and they are waking up hungry,” said Paul Kurzawa, president and incoming CEO of Centennial, a retail owner and operator. “The rebound in equity and debt market fundamentals is fueling the search for strong double-digit returns over short- to mid-term holds with spreads of 150 to 200 bps that outperform the market indexes. Those types of returns are now achievable, but only in the right situations.” Kurzawa, who oversees a 25 million-square-foot portfolio across 18 states, said the real shift isn’t just that capital is returning, but that investors are being far more selective about where they deploy it. “What we have seen as well, especially this year, in a lot of the institutional investors and venture funds that I’ve met with, is that there’s an appetite for core+ assets in a very big way,” Kurzawa said, referring to assets that are higher-end but still low-risk and long-term buys. Institutional investors represented nearly 24% of multitenant retail investment over the past 12 months, their highest reported investment share since 2017, according to JLL. And bigger appears to be better. High-ticket, $100 million-plus deals made up 26% of retail investment from the first quarter of 2025 through the first quarter of 2026, compared with just 13% in 2023. “Many institutional investors are still under-allocated to retail relative to other property types,” Kurzawa said. “As more capital comes off the sidelines, investors are pursuing larger portfolio and trophy-quality acquisitions to deploy capital more efficiently and quickly meet allocation targets.” The challenge, he added, is that there simply aren’t enough high-quality assets trading. That imbalance between strong investor demand and limited supply is creating more competition in the $100 million-plus deal space. He noted that the value-add properties, where investors would need to upgrade, “is a little bit more tricky” but that he’s seeing more capital flow there as well. “Investors are asking hard questions about where they can realistically create value, specifically through diversifying uses or repositioning assets. If the story requires too much hope instead of math, those deals just aren’t getting done,” he said.
