Retail Real Estate Shifts Toward Smaller Stores and Prime Locations
As retail real estate professionals head to Las Vegas for ICSC this May, they're confronting a market that isn't retreating—it's recalibrating. Tenants are shrinking their footprints, landlords are rethinking how to fill larger spaces and demand is concentrating around top-tier locations, reshaping how deals get done across the sector.
Executives at NAI Farbman tell GlobeSt.com that one of the most pronounced shifts is a continued push toward right-sizing retail space. National tenants are increasingly opting for smaller footprints, forcing landlords to reconsider how to position and subdivide larger vacancies.
"Once a space reaches 4,000 square feet or more, it becomes significantly easier to invest the capital required to subdivide," Brandon Ben-Ezra said. "That flexibility is key, and we're seeing tenants transition from a single larger location to multiple smaller ones."
That shift is helping unlock another major trend: the rise of experiential retail. Larger spaces that were once difficult to lease are now being absorbed by entertainment-focused users, including virtual reality venues, golf simulators and family-oriented activity centers, as landlords adapt to evolving consumer expectations.
At the same time, health and wellness concepts are expanding rapidly. Brokers report strong demand from boutique fitness operators and personal care tenants such as medical spas and nail salons, reflecting sustained consumer interest in wellness-driven lifestyles.
Food and beverage tenants remain a dominant force, particularly in fast-casual and drive-thru formats. Gavin Mills, a sales associate at NAI Farbman, tells GlobeSt.com that competition for these locations is intense and moving rapidly.
"The market for these locations is highly competitive, costly and fast-moving," Mills said. "Spaces often don't last more than a few months, so tenants need to be ready to act quickly."
Even as e-commerce continues to expand, physical stores remain critical for brand visibility. Mills says many traditional retailers are doubling down on high-profile storefronts in heavily trafficked areas to maintain customer engagement and reinforce their presence.
Looking beyond ICSC and into the second half of 2026, location quality is expected to play an even greater role in determining success. Ron Goldstone, executive vice president at NAI Farbman, points to a growing divide between top-performing assets and the rest of the market.
"There is a clear flight to quality," Goldstone said. "With less room to deviate from optimal locations, the best sites in regional retail centers are where deals are getting done."
While overall foot traffic remains below pre-pandemic levels, shifting market dynamics are creating new opportunities. Retailer consolidation and store closures are freeing up space in established corridors, allowing expansion-minded tenants to move into proven locations. In the Midwest, that trend is already taking shape, with Gardner White planning to open 9 new stores in former Value City Furniture locations.
As the industry gathers in Las Vegas, brokers and landlords are focused on a retail landscape defined by efficiency, experience and quality—one that is evolving with intention rather than contracting.
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Source: GlobeSt/ALM