A Smarter Framework for Retail Development in 2026

In ULI/PwC’s Emerging Trends in Real Estate® 2026 interviews, a REIT partner summed up the moment as “uncertainty fatigue.” For retail developers heading into 2026, that rings true, but it doesn’t have to be paralyzing. The developers who keep winning are the ones who systematize diligence, validate tenant demand, and design flexibility into the plan from day one.

The Hidden Story in Today’s Numbers

The ULI/PwC Emerging Trends in Real Estate® 2026 retail outlook notes that national retail vacancy was ~4.3% through Q3 2025 and edging up. At face value, that sounds manageable. The nuance is what matters.

As the report explains, limited new supply has helped the market absorb closures, and 2025 is on pace to be one of the weakest years this century for new retail deliveries, with roughly 19.6 million square feet delivered through Q3. Meanwhile, CoStar data cited in the same outlook shows net absorption turning negative (about -10.6 million SF) through the first nine months of 2025.

Translation for ground-up developers: the environment is supportive of the right projects (because supply remains constrained), but the underwriting bar is higher because demand is selective and execution risk is real.

What We’re Seeing in Dealmaking

In new shopping center development, success is increasingly about reducing “unknowns” early, before you’re too far into design, civil, and capital commitments.

We’re seeing best-in-class developers:

• Set tougher pre-leasing thresholds before going vertical
• Phase projects to match real absorption
• Underwrite tenant risk more like credit risk, especially for emerging concepts
• Design for flexibility so a plan still works if the tenant mix shifts

The common theme: treat uncertainty like a variable to model.

The New Decision Framework for 2026

Understanding Category Dynamics at a Granular Level

The ULI/PwC outlook points to continued activity in necessity and service-oriented categories—but the actionable edge comes from understanding why growth is happening, where it’s happening, and what format tenants are actually deploying.

What to know going into entitlements and site planning:

• Winners aren’t random: Discount, value grocery, beauty, and medical/wellness continue to show expansion signals because they align with post-pandemic consumer behavior and daily needs.
• The middle is disappearing: An institutional landlord quoted in the report described “unwelcome news” ahead for undifferentiated middle-market brands.
• Format matters: “Retail growth” can mean smaller boxes, different parking ratios, and more service uses, implications that should shape your site plan, not just your leasing deck.

Reading Beyond the LOI

In 2025, execution risk moved back to the center of retail underwriting. The ULI/PwC outlook cites that Coresight expects 15,000+ store closures in 2025, and The Brown Book reports many chains that entered 2025 in expansion mode have since pulled back. Pair that with negative net absorption through Q3 2025, and the takeaway is straightforward: an LOI is not the same as a committed expansion machine.

What should you pressure-test before treating an LOI as financeable demand?

• Openings vs. announcements: What have they actually opened in the last 12 months, and at what pace?
• Comparable performance in similar trade areas: Do we see evidence the concept works in markets like yours (not just in their home region)?
• Capital reality: Are they self-funding, PE-backed with a defined rollout budget, or dependent on “future capital?"
• Real estate leadership depth: Do they have the internal muscle to site, negotiate, build, and open on schedule?

The Three-Scenario Minimum

Given current volatility, underwriting to multiple scenarios is the practical minimum. The projects that pencil in 2026 are the ones that work under multiple futures:

• Base case: Slow growth, selective tenant expansion, and modest rent growth (the ULI/PwC outlook cites CoStar rent growth around 1.8%).
• Downside case: Elevated closures (Coresight’s 15,000+ forecast) and slower leasing velocity. Can your deal hold coverage, debt terms, and leasing momentum?
• Upside case: If capital loosens or consumer confidence improves, can you accelerate phasing and capture demand without redesigning the site?

Instead of pessimism, it’s disciplined development.

Location Intelligence That Goes Deeper

For new shopping center development, “good corners” still matter. But today’s winners use deeper location intelligence to reduce entitlement and leasing risk:

• Mobility + daytime patterns: Work-from-home and hybrid schedules changed the shape of peak demand in many trade areas.
• True competitive supply: Not just existing centers—also approved projects, land with entitlements, and likely alternative uses that compete for spend and traffic.
• Municipal readiness: Permitting velocity, infrastructure timelines, and political support can be the difference between hitting your delivery window or missing it.
• Access and circulation under real use-cases: Service-heavy tenant mixes change parking turnover, peak times, and site flow more than many traditional retail models.

The Talent Pipeline Reality Check

A quieter constraint in 2026 planning is capacity, especially on the construction side. Construction labor availability continues to shape bid cycles, timelines, and cost certainty, and industry estimates point to a substantial need for net new workers to meet demand in 2025 and beyond.

How developers can factor this into ground-up risk:

• Timeline realism: Assumptions on bid cycles, lead times, and build schedules need to reflect current capacity constraints.
• Tenant readiness: Some tenants can sign quickly but struggle to build and open quickly—especially in new markets.
• Phasing strategy: Phasing isn’t just financial; it’s operational. It helps you match delivery to real construction capacity and real leasing velocity.

The Intelligence Advantage

What could separate successful shopping center developers isn’t optimism or pessimism. It’s information quality.

The biggest decision upgrades we see come from:

• Category-level forecasting tied to real formats (box sizes, parking needs, co-tenancy rules)
• Tenant validation that goes beyond LOIs into real openings, capital, and operational capacity
• Trade area modeling that reflects post-pandemic mobility patterns, not just static demographics
• Competitive pipeline intelligence that includes future supply and alternative uses, not only existing retail

Making Decisions in the Fog

The harsh reality: uncertainty isn’t resolving anytime soon. Developers can work in this reality by building repeatable decision discipline:

• Accept perfect information doesn’t exist, but better validation does
• Invest upfront in diligence to avoid expensive redesigns and leasing resets downstream
• Build flexibility into design and phasing so you can adapt without restarting entitlements

The Path Forward

The ULI/PwC outlook captures the mood well: “uncertainty fatigue,” but not inevitability. Fatigue can be overcome with a smarter operating system for development: one that treats tenant demand, execution capacity, and location dynamics as variables you can measure and manage.

As we head into 2026, the question isn’t whether the market will remain uncertain. It almost certainly will. The question is whether you have the intelligence infrastructure to navigate that uncertainty with confidence.

The good news? In a market where fewer projects are getting built, the developers who can validate demand and execute cleanly have real opportunity. The bad news? The margin for error is thinner than it’s been in years.

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Sources: ULI/PwC Emerging Trends in Real Estate® 2026 (Retail outlook / Chapter 2: Property Type Outlook, Retail), including referenced data from CoStar, Coresight, and The Brown Book.

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