Retail’s Second Act
Why America’s most valuable square footage now sells connection, not consumption.
The reinvention of America’s ground floors is not a pandemic epiphany. It has been in motion for 15 years. As early as the mid-2010s, landlords were already replacing pure retail with food, fitness, and culture. CoStar data show that the share of non-retail uses in malls rose from 19.2% to 23.1% between 2012 and 2018, while food-and-beverage footprints nearly doubled—an early signal that the “anchor” was becoming an amenity. Food halls tell a similar story, growing from just a few dozen around 2010 to hundreds by the late 2010s, with 127 additional U.S. projects under development in 2023 and 2024.
What has changed now is scarcity and selectivity. After a bruising period of bankruptcies and churn, the development pipeline has tightened. Retail construction starts are down roughly 50%, and national vacancy sits near 4.3% in the second quarter of 2025—the lowest level in decades. Very little new space is truly available. Most of what is delivered is already spoken for, and on average, only about a quarter of new square footage actually reaches the open market. Ground-floor space has shifted from a commoditised leasing line to a precious tool for place-making and value protection. Cushman & Wakefield reports that retail occupancy has rebounded to record-low vacancies, driven not by old-school anchors but by formats that “activate” streets and extend dwell time.
The tenant mix has also evolved from selling goods to delivering services and experiences. Health providers, constrained by the supply of medical offices, are pushing into street-level retail. By 2024, health systems accounted for 53% of healthcare construction starts, up from 43% in 2019, while outpatient absorption reached 19 million square feet across the top 100 markets. Food and beverage remains the workhorse of activation, yet the role now extends beyond dining. Wellness studios, cultural incubators, maker spaces, and event programming function as social infrastructure, sustaining rents upstairs by keeping the sidewalk alive downstairs. Fairfax County’s recent retail-trends report is blunt about the counterfactual: a dark, generic storefront is a “negative amenity.”
Investors have taken notice. Despite the headlines about closures, net-new demand has remained sturdy since 2021. CoStar estimates that more than 200 million square feet of retail space became newly occupied through 2024—remarkable given the lack of new construction. The result is an arms race in curation. Developers are using ground-floor square footage as a neighbourhood living room, trading some base rent for stickier districts, faster lease-up of upper floors, and lower turnover risk.
The next chapter is unfolding away from the coastal giants. Nashville is a standout example, where mega mixed-use developments such as the East Bank project weave retail, public space, and culture into districts designed to hum well past office hours. Detroit is earlier on the curve. Its revival is genuine but fragile, making it fertile ground for hyper-local food, arts, and wellness concepts that turn civic pride into pedestrian energy. Tampa and the Phoenix suburbs are demographic winners with limited experiential stock. Their challenge—and opportunity—is to transform power-center skeletons and former malls into walkable, mixed-use canvases. National trackers already count more than fifty mall redevelopments underway, and the winners will design lawns and plazas rather than just leases.
The transformation has been unfolding since the early 2010s. What distinguishes today is a supply-constrained market that forces every square foot to work harder—as a community amenity, a brand theatre, and a service hub. In the 20th century, ground floors pulled shoppers through doors. In the 21st century, they pull neighbourhoods together.
If the street level has become the new social commons, not just the retail floor, the question for America’s next wave of developers is no longer what to lease but what kind of life they want to build at ground level. If the ground floor is now the city’s living room, why are so many developers still furnishing it like a mall? If activation, rather than anchors, drives NOI upward, what is your capital plan for curating street life rather than simply filling space? And if “experiential” is today’s dogma, what happens to value when the experience grows old?