After over a decade of conversation about the decline of brick-and-mortar retail, the current state of the market is proving the industry’s resilience, with retailers fighting for physical space. The demand for well-located, quality retail space exceeds the available inventory, intensifying the competition for valuable real estate and driving rents up. Clever retailers have become more flexible and creative with the leases they sign and spaces they’re willing to move into. Adaptive reuses, flexibility from prototypical sizes and shapes, and unconventional layouts are all on the table if the location is right. This signals a shift for the industry, where retailers must rethink their deal strategies and deal speed to navigate a highly competitive, constrained market.<\/p>\n
With this supply squeeze, one of retailers’ top challenges is the extremely limited amount of new development. High construction costs translate into more than the market can bear in rents, tariff impacts remain, and building new shopping centers takes years, leaving value-driven retailers with few options for expansion. At the same time, excess supply from overdevelopment in the early 2010s has been fully absorbed, leaving limited viable options. A leading tenant side market participant referred to it as “the retail hunger games.”<\/p>\n
Sure, recent bankruptcies have helped bring some properties back to the market, but many of them are older buildings that need extensive remodeling or, in some cases, demolition. With limited new property available, retailers are re-evaluating factors like square footage and layouts to get a better deal. The best spaces in the 2025 bankruptcies of Big Lots, Party City, and JoAnn Fabrics are taken. These companies did sales of less than $100 per square foot on average, proving that larger footprints do not equal higher returns. Because of this, many retailers are eyeing smaller footprints in more desirable locations.<\/p>\n
Retailers that are willing to be flexible with the spaces they occupy will see the strongest return. Nimble brands like Boot Barn, Burlington, J.Crew Factory, and Five Below have benefited from being agile, expanding in key markets that would otherwise be out of reach. Additionally, retailers that are willing to reuse existing infrastructure are often securing lower rents, better lease terms and opening stores quicker. Remodeling is another worthwhile option to maximize location. Adaptive reuse has become a popular solution for retailers that want to be in these well-located, mainly suburban areas. The best-positioned retailers are working alongside owner-operators with architectural firms to assess properties even before they sign the lease to consider reconfiguring layouts and the most effective negotiation for reuse spaces. At DLC, we helped one retail client open half a dozen new stores ahead of schedule by reusing older buildings and systems like HVAC units.<\/p>\n
In a highly competitive, space-constrained market, retailers that acknowledge shifts in market dynamics and adapt quickly will win in this “bridge year” of 2026. It’s vital for all departments to move quickly at every level of a deal to secure valuable space and beat out competition. This may look like signing a lease earlier than anticipated or offering more capital for an attractive space. Those that can flex on frontage and size, reuse infrastructure, and accelerate deal-making will be best positioned to secure space in tight markets.<\/p>\n