CoStar: Retail vacancy rate to dip heading into 2027
Retail fundamentals are expected to improve in the short-term, with the national vacancy rate expected to dip by year’s end.
New data from CoStar reveals that national retail vacancy is now forecasted to end 2026 at 4.26%, down from 4.32% in the third quarter. Asking rent growth, which slowed in the third quarter according to CoStar, is estimated to reach $26.36 per square foot at the end of the year, before rising to $27.12 per square foot by the end of 2027.
[READ MORE: CoStar: Retail tenants continue filling existing space]
“Compared with the prior forecast, the near-term vacancy outlook has strengthened as second-half demand outperformed earlier expectations,” said Brandon Svec, national director of retail analytics at CoStar Group. “Demand is expected to cool in 2027, however, as annual net absorption is projected to fall roughly 15 million square feet, which would trail 16.8 million square feet of anticipated deliveries.”
Muted new construction continues to have an impact on the commercial real estate landscape. CoStar’s recent data reveals that roughly 58.3 million square feet of retail space was under construction in the third quarter, down from 60.6 million square feet in the second quarter and 63.3 million square feet in the first quarter. Despite being unchanged from a year prior, the metric remains roughly 4% below its prior 10-year average of 60.7 million square feet.
Svec added that ongoing high energy prices and high interest rates could have an impact on the forecast, as consumers may scale back spending and put increased pressure on retailer margins.
“These risks, however, should be viewed against a retail market that remains fundamentally tight, with low vacancy and limited new construction providing a meaningful buffer against a softer economic environment,” he said.
CoStar’s full forecast can be found here.
