For much of the past decade, retail real estate was widely viewed as a structural loser, pressured by e-commerce, changing consumer behavior, and pandemic-era disruptions. But beneath the national narrative, a very different story has been unfolding in New York City, according to new analysis from JLL. Retail has emerged as one of the strongest and most competitive segments in U.S. commercial real estate, driven less by recovery and more by fundamental repositioning. 

Nationally, U.S. retail investment volume reached $44 billion through the third quarter of 2025, up 33% year over year and already nearing full-year 2024 levels, according to Scott Aiese, Senior Managing Director, Capital Markets, JLL New York. 

Institutional investors—long absent from the sector—are leading the charge, now accounting for 19% of retail transaction volume, nearly double last year’s share. Relative pricing has played a role: retail assets are increasingly attractive compared with office, multifamily, and industrial, particularly as cap rates across property types converge. 

“Supply and demand fundamentals are creating favorable tailwinds for the sector,” Aiese said. National retail vacancy has fallen to a record low 4.3%, while new construction has all but stalled. With limited new deliveries, landlords are regaining pricing power as tenant demand continues to firm. 

Nowhere is this dynamic more pronounced than New York City, according to JLL. The market has reclaimed its position as the largest retail investment destination in the country, with year-to-date volume up 22% and outperforming peers such as Los Angeles, Dallas, and Miami. Prime Manhattan retail availability has dropped to just 14.2%—the lowest level on record—down sharply from pandemic peaks near 29%. 

As space tightens in marquee corridors like SoHo and Fifth Avenue, demand is spilling into adjacent submarkets, according to the analysis. Areas such as Union Square and Williamsburg are seeing rapid declines in availability and outsized rent growth, signaling a market that is not just recovering, but actively reallocating. 

Consumer behavior is reinforcing the shift. Physical stores remain central to shopping plans, particularly in value-oriented and experiential formats. At the same time, more competitive debt markets and stabilizing rate expectations are accelerating transaction activity. 

“With supply remaining constrained, tenant demand building momentum and rents positioned for continued growth, current data suggests that NYC’s retail market maintains significant upside potential, solidifying its status as one of the most compelling investment opportunities in the emerging cycle,” Aiese said. 

Pictured: Scott Aiese