Retail Market Outlook: Navigating Change in 2026 and Retail Therapy
As we step into the new year, the retail real estate landscape continues to evolve in response to shifting consumer behaviors, economic pressures, and structural changes within the industry.
U.S. Retail Market Overview
The U.S. retail real estate market[1] demonstrated resilience in late 2025, reversing earlier declines with positive net absorption of 4.7 million square feet in the third quarter after a challenging first half of the year that saw 14.4 million square feet of negative absorption. Vacancy remains tight at 4.3% nationally, supported by limited new supply. Net deliveries totaled 7.6 million square feet, while the construction pipeline fell to 50.6 million square feet, reflecting developers’ cautious stance amid rising costs and competition from alternative property types.
Retail demolitions reached 13 million square feet by late 2025, primarily obsolete malls and department stores, further constraining supply and sustaining rent growth. National average rents stand at $25.52 per square foot as of late 2025, with modest year-over-year growth of 1.9%.
Orange County Retail Trends
Orange County’s retail market[2] ended 2025 with a vacancy rate of 3.6%, which is only slightly higher than the 3.5% recorded a year earlier. Average asking rents remained steady at $2.64 per square foot per month, showing virtually no change year-over-year. Construction activity increased, with 295,304 square feet under development, representing a 33.8% rise compared to the previous year. Deliveries were limited to 31,028 square feet during the quarter, while net absorption was positive at 10,935 square feet.
The constrained retail supply and evolving consumer preferences have accelerated the repurposing of underperforming malls and big-box properties into residential communities. Across Southern California, this trend is reshaping the landscape. A Costar article from early 2025[3] stated, “The move comes as residential property takes over an increasing number of traditionally retail parcels across Orange County and the United States. A housing shortage in markets across the country is particularly acute in Southern California, making these types of projects a more familiar sight.” But these conversions not only address housing shortages, they also unlock value from aging retail assets that no longer meet market demands.
Retail Therapy
At Integris Real Estate Investments’ parent company, Shopoff Realty Investments, we have embraced this transformation and implemented this behavior into our strategy, which I often refer to as “Retail Therapy.” While we believe retail is far from dead, it is important to keep consumers in mind, especially with the dominance of online shopping. Thoughtful retail spaces in strategic locations remain highly desirable, particularly those that offer experience-based elements and are part of mixed-use developments.
One example is Sunrise Village, a shopping center in Fullerton, which the firm acquired in April 2021. Four of the parcels have since been sold and remain as retail sites, with necessary improvements made. The firm entitled the remaining 9.93-acre parcel for residential development, The Pines at Fullerton. The property was sold to Lennar Homes in 2023 and is currently under construction, slated to deliver 113 homes, including 49 small-lot detached homes and 64 townhouses.
Looking Ahead
As we enter 2026, we remain optimistic about the opportunities ahead. The retail sector’s evolution, combined with strategic redevelopment initiatives, positions us to be hopeful in a dynamic environment. We will continue to transform challenges into growth and create spaces that meet the needs of tomorrow.
Disclosures
[1] Jones Lang LaSalle. United States Retail Market Dynamics Q3 2025. JLL, 2025, https://www.jll.com/content/dam/jllcom/en/us/documents/reports/research-reports/25-insights-united-states-retail-market-dynamics-q3-2025.pdf.
[2] Kidder Mathews. Orange County Retail Market Report: Fourth Quarter 2025. Kidder Mathews, 2025, https://kidder.com/wp-content/uploads/market_report/retail-market-research-orange-county-2025-4q.pdf.
[3] Boswell, Brannon. “Southern California Retailing Icon Demolished to Make Way for Housing.” CoStar News, 25 Apr. 2025, https://www.costar.com/article/1602646684/southern-california-retailing-icon-demolished-to-make-way-for-housing.
*There is no assurance that this strategy will succeed to meet its investment objectives. This newsletter is for informational purposes only and does not constitute investment advice or an offer to buy or sell securities. Past performance is not indicative of future results. This is not an offering to buy or sell any securities. Such an offer may only be made through the offering’s memorandum to accredited investors. Any investment in Shopoff Realty Investments (“SRI”) programs involves substantial risks and is suitable only for investors who have no need for liquidity and who can bear the loss of their entire investment. The performance of former assets is not indicative of the future results of other assets. Securities offered through Shopoff Securities, Inc. (“SSI”) member FINRA/SIPC. Forward-Looking Statements: This communication contains forward-looking statements based on current assumptions and expectations, including statements about anticipated market conditions and project plans. Actual outcomes may differ materially due to risks and uncertainties, and we do not undertake any obligation to update these statements.
