U.S. retail activity improved in the second quarter of 2026, with sales increasing, net absorption improving and investment activity accelerating, according to a report from JLL.

Demand for retail space rebounded in the second quarter, with net absorption reaching 10.2 million square feet, a major improvement from the first quarter’s negative net absorption of 4.5 million square feet. JLL found the April to June period to be the second-strongest quarterly level of absorption in two years.

Retail investment has also accelerated, with activity during the first half of this year reaching $33 billion, up 14% from the same period a year ago. It was the strongest first half of the year since 2022. JLL noted the increased activity is tightening pricing and compressing cap rates across retail sub-types.

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JLL surveyed investors and found that 64% expect higher acquisition volume this year, while 48% anticipate more dispositions and increased interest in secondary markets, where yields can potentially outpace primary markets.

The retail market is also beginning to attract more institutional players, such as the TPG-led investor group that in June acquired grocery-anchored retail leader Echo Realty, which owns and operates about 230 retail centers in the Midwest and Southeast.

Malls make a comeback

Retail sales remained strong in the second quarter, with total retail and food services sales reaching $2.3 trillion, up 6.4% from the previous year and 2.9% from the first quarter. The category experiencing the highest sales growth was gas stations, up 23.2% year over year. But when gasoline and auto dealers are stripped out of the equation, retail sales growth still came in 5.1% above the second quarter of 2025.

Sales growth was pronounced in the sporting goods, hobby and bookstore category, which jumped 13.7% year over year. Non-store retailers, which includes online sales, were up 12.6%, and electronics sales grew by 8%. The laggard category was furniture and home furnishing stores, which dropped by 1.1% in sales from the previous year.

Retail demand increased the most for freestanding stores and single-tenant boxes during the second quarter, with net absorption rising to 7 million square feet.

The real surprise, however, was the relatively strong showing for malls and neighborhood centers, which saw positive absorption after experiencing significant negative absorption in the first quarter. Malls, which have suffered through a severe downturn for much of the past decade, moved into positive absorption territory for the first time in more than a year. Neighborhood centers also saw positive absorption.

There are indications suggesting increased retail activity in the third quarter. Back-to-school spending is expected to rise to $489 per child, an increase of $52 from the previous year. The 11.7% gain is much stronger than the general inflation rate of 3.5%.

Construction pipeline trends

Retail construction remains historically low across the nation. This has limited availability, kept vacancies low and increased pricing power for landlords. But there are areas, mainly in the Sun Belt, where retail properties are growing.

The Dallas-Fort Worth metropolitan area leads the nation in retail expansion with nearly 96 square feet under construction per 100 residents. This area’s retail growth is 40% ahead of the next closest market, Tampa-St. Petersburg, Fla., which has 69 square feet of retail under construction per 100 residents. Just behind is Las Vegas, with 68.7 feet under construction per 100 residents. These three metropolitan markets comprise the top tier for retail expansion.

Other top 10 markets for expansion included Houston, Phoenix and Charlotte, N.C., as well as Miami, Atlanta and Orlando, Fla. The only city not in the Sun Belt to crack the top 10 was Denver. One aspect these markets tend to have in common is that they enjoy generally strong in-migration that is outpacing legacy retail stock.