- Diesel averaged $6.38 per gallon on Sept. 28, up from about $3.81 in late February, adding to construction and supply-chain costs for retail developers and retailers.
- Just over 60M SF of retail is under construction, 4% above the all-time low CoStar has recorded, while JLL put Q2 vacancy at 4.4% and net absorption at 10.2M SF.
- Retailers such as Aldi, Burlington, TJ Maxx and Dollar Tree plan large store expansions, but flat rents and rising costs mean limited new supply to absorb them.
Record diesel prices are hitting retail development just as retailers push to open more stores, according to Commercial Observer. Diesel topped an all-time average high of $6 per gallon in September and averaged $6.38 on Sept. 28, per the U.S. Energy Information Administration.
Diesel averaged about $3.81 when the U.S.-Iran conflict began in late February.
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Costs Outrun Rents
Retail rents have been chronically flat, analysts said. Construction spending rose more than 42% between August 2020 and August 2026, per the U.S. Census Bureau, but retailers’ compressed margins cannot support the higher rents new development needs.
CoStar’s Brandon Svec said rents have not risen at anything like the pace of other asset types over the past 15 years, leaving a substantial gap between build costs and market rents.
Tight Supply, Strong Demand
Retailers took more space in Q2 2026 than in any quarter since 2022, per CoStar. JLL reported Q2 net absorption of 10.2M SF and total vacancy of just 4.4%.
Just over 60M SF is under construction as of September, only 4% above the lowest level CoStar has tracked in 25 years. Outside hot spots like Dallas and Phoenix, the five-year pipeline is thin, and less than 30% of new retail sites are available to lease.
Retailers Keep Expanding
Whole Foods, Aldi, T.J. Maxx and Burlington plan new U.S. locations. Dollar Tree opened 402 stores in 2025 and plans 400 more in 2026, while Dollar General started the first $1.6B phase of a store renovation plan that includes 450 new locations this year.
Kimco reported record occupancy in August and higher rents on new leases. COO David Jamieson said he expects more acquisitions, though cap rate compression from capital chasing unanchored strips offsets some of that, a theme in Kimco’s leasing record.
Why It Matters
Much recent expansion is backfilling closures, such as Burlington taking over 45 Joann leases last year, often at below-market terms. Svec said retailers that hesitate may lose their only shot in markets with few available spaces.
JLL’s James Cook said retailers see strong shopper demand for value but struggle to find places to open. For development to rebound, rents would need to rise while land and construction costs fall, and that looks unlikely soon. The squeeze also matches wider pressure from construction costs.
What’s Next
Retailers’ ability to absorb costs depends on strong sales through year-end, and consumer resilience could weaken if job growth keeps cooling. Consumer prices are up nearly 30% since January 2020, per the Bureau of Labor Statistics, and Placer.ai data show gas station visits down as much as 4% year over year in late August.
Cook said consumers are shifting to value as much as they can, though he does not think they have reached the point of forgoing purchases yet.
