Your Retail Property Is Worth More Than You Think. Here's the Proof!
Marc Perlof • April 20, 2026
By Marc Perlof | MarcRetailGuy
CA #01489206
April 21, 2026
If you own retail real estate, here's what just changed for you.
The supply drought in retail is no longer a temporary condition. In Southern California, where available retail space was already scarce before construction costs spiked, it has become a structural advantage for owners. Fewer new competition means higher rents, tighter vacancy, and growing buyer demand for what you already own.
What Is the Supply Drought?
For over 15 years, developers have barely built any new retail space. That is not an accident. It is the result of rising construction costs, tighter lending, and weak developer confidence following the so-called retail apocalypse narrative.
The numbers tell the story clearly. According to CBRE, annual retail construction completions from 2021 through 2023 fell by more than 80% compared to the mid-2000s. Construction starts hit all-time lows in both 2024 and 2025, according to Newmark's 2026 Sector Outlook. Colliers forecasts new retail construction will fall another 37% in 2026.¹
There is simply no new supply coming. And that matters enormously for what your property is worth today.
What Is Causing It?
Three forces are keeping new supply off the market simultaneously.
First, construction costs remain elevated. Steel, aluminum, and copper are all subject to significant tariff pressure, which has driven up hard costs on any new development. Second, lenders are cautious. Retail lending has improved but has not fully recovered. Financing new ground-up retail is still expensive and difficult. Third, most developers who would normally deliver new product are focused on redevelopment, not new construction. Ground-up speculative retail is largely off the table for now.
The result is a market where existing retail owners hold an advantage that cannot be easily replicated or replaced.
Why Does This Matter for Your Property Value?
How does limited supply affect rent?
When tenants cannot find new space, they compete harder for existing space. That competition drives rent. According to JLL's Q2 2025 Retail Dynamics report, retail vacancy nationally sat at 4.3% at the end of the second quarter of 2025, with rent growing 2% year over year.² Colliers projects nationwide rent growth of approximately 1.5% for 2026, supported entirely by the lack of new supply. In supply-constrained markets like Southern California, rent growth at renewal has been running well above that average.
Occupancy rates in REIT portfolios are holding at approximately 95%, according to Nareit analysis of Q3 2025 REIT earnings. That is not a cyclical number. That is a structural one.
How are buyers underwriting retail today?
Institutional capital has returned to retail in force, and they are underwriting it aggressively. According to JLL, the volume of institutional bids on retail properties being marketed for sale grew 102% over the past two years. REIT bid volume increased 117% over the same period.
According to Northmarq, they are seeing sales activity and buyers paying more for the same income, which means your property is worth more today than it was two years ago across active shopping center markets. In California alone, 18 deals in the second half of 2025 exceeded $100 million, according to ICSC reporting. U.S. retail property sales rose 26% to $71.6 billion in 2025, according to MSCI.³
This is what happens when institutional money competes for a shrinking pool of quality assets.
What Should You Do Right Now?
- Understand your rent position relative to market. If your current leases were signed two or more years ago, there is a strong probability your in-place rents are below today's market. That gap represents unrealized value. Document it. A well-presented rent roll showing rent-to-market spread is one of the strongest tools you have in a sale or refinance.
- Push rents at renewal. This is not the time to roll over leases at flat rates. Tenants have nowhere else to go. Demand for retail space is high and available supply is near record lows. Landlords in supply-constrained markets have real pricing power. Use it.
- Assess your hold vs. sell timing. Institutional capital is actively deploying into retail right now. Bid volume is at its highest level since 2016. If you have been waiting for the market to stabilize before selling, that moment is here. Cap rate compression in well-located strip centers and shopping centers is real and documented. Waiting longer depends entirely on your basis, your lease structure, and what you plan to do with the proceeds.
Real Deal Insight
In conversations I'm having with buyers right now, the first thing they ask for is the spread between in-place rents and current market. That number is driving offers more than cap rate right now. In active retail investment transactions today, buyers are paying close attention to the spread between in-place rents and current market rents. Properties showing significant upside to market are receiving aggressive offers. Strip centers and unanchored centers with short remaining lease terms are being underwritten with meaningful rent growth assumptions baked in, which is directly compressing cap rates and pushing values higher.
Owner Self-Assessment
If your leases were signed more than 24 months ago, do you actually know how far below market your rents are sitting right now?
Do you know what a buyer is underwriting (How a buyer decides what your property is worth to them) your property at today, versus what you think it's worth?
And if institutional capital is actively competing for assets like yours, do you have a broker with the market exposure to put your property in front of that demand?
If any of those answers are unclear, that's the conversation worth having.
If you couldn't answer those questions with confidence, let's talk. A 20-minute call is all it takes to tell you where your property stands today.
If institutional capital is competing harder than ever for retail properties, the real question is: are you positioned to capture that demand, or are you leaving money on the table?
Based in Los Angeles. Serving Southern California. Active across California. Advising clients nationwide.
#RetailRealEstate #RetailREIT #ShoppingCenterInvestment #StripCenters #CommercialRealEstate #SouthernCalifornia #LosAngelesRealEstate #RetailInvestment #NNNProperties #CRE #MarcPerlof #MarcRetailGuy
Sources
² JLL, Q2 2025 Retail Dynamics Report, citing CoStar data.; Nareit, Retail REITs Supported by Tight Supply, October 2025:
Disclaimer
This post is for information only. It is not legal, tax, or financial advice. Always check with a licensed professional before making decisions.
© 2026 Marc Perlof Group. All rights reserved.
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By Marc Perlof | MarcRetailGuy CA #01489206 April 13, 2026 If you own retail real estate, here’s what just changed for you. Private equity ownership changes the risk profile of your tenant. Strong brands can become more efficient, but also more sensitive to costs over time. When private equity takes over retailers, your rent may become less predictable. What is changing? Private equity firms are buying or investing in retail brands. After the purchase, they often change how the business is run. One common move is selling the real estate and leasing it back. The company becomes a tenant instead of an owner. This creates fixed rent payments. They also focus on increasing profit quickly. That can include cutting costs, simplifying operations, and shifting more stores to franchisees. These changes can improve efficiency and free up capital, but they can also increase pressure on store-level performance. Why this is happening? Private equity is focused on returns within a set time frame. They use debt and operational changes to increase profits. Real estate is often treated as a source of cash, not a long-term hold. What this does to your value? How does this affect your property value? Your value depends on stable income. Higher leverage and tighter margins make your income less predictable. Uncertainty leads to higher cap rates. Higher cap rates lower your value. A 100 basis point increase in cap rate can reduce your property value by 12% to 18%, depending on income and buyer demand. How are buyers underwriting this today? Buyers are looking past the brand name. They are focusing on unit-level performance and rent levels. If rent is too high compared to sales, they apply a higher cap rate or reduce their offer. What happens if the tenant’s costs increase? When rent, labor, and food costs rise at the same time, weaker locations start to underperform. That is when closures or lease renegotiations happen. Strategic Advice for Retail Property Owners What should you do right now? Review your tenant’s ownership structure. Know if the brand is private equity backed. Do not assume brand strength equals tenant strength. What should you review in your lease? Focus on rent relative to sales, if possible. Rent that gets too high as a percentage of sales creates risk. Also review lease term, options, and guarantor strength. What should you prepare for? Plan for more tenant scrutiny at sale. Buyers will ask deeper questions about store performance and long-term viability. Be ready to support your income with real numbers. Real Deal Insight In today’s market, buyers are underwriting rent relative to store performance or sales, franchisee versus corporate structure, and margin pressure. Deals that once traded aggressively are now being discounted when rent exceeds sustainable levels or when the tenant is more leveraged after a private equity transaction. This is showing up in pricing, cap rates, and buyer demand across Southern California. Owner Self-Assessment If your tenant’s costs increase, can they still comfortably pay your rent? Market Data and Sources Sale-leasebacks are widely used in restaurant and retail sectors to free up capital and create long-term lease obligations.¹ Private equity ownership often increases leverage, which can raise financial risk during downturns.² Restaurant margins are sensitive to labor and food costs, which have increased in recent years.³ If you own retail real estate in Los Angeles or Southern California, this is already showing up in how buyers evaluate NNN properties, strip centers, and single-tenant assets. If you are thinking about selling or refinancing in the next 12 to 24 months, now is the time to evaluate your tenant strength and pricing. Small shifts in cap rates can materially impact your exit value. Is your tenant’s business strong enough to support your rent long term? #RetailRealEstate #NNNProperties #FastFoodRealEstate #CommercialRealEstate #CapRates #LosAngelesRealEstate #CREInvesting #InvestmentProperty #NetLease #RetailInvesting
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