Every large space can be trimmed down to a small space. If there are too many vacant shops in an area, and there would be a market for smaller shops, I would assume that tenants add walls and rent out the smaller space. Even if that walled-off space is unused, tenants would make more money than not renting out at all.
The oft-cited counterexample to US restrictive zoning, Japan's permissive zoning, works because in Japan zoning type is decided at the national level and there are only 12 types of zoning that define maximum nuisance (so a blacklist). US zoning gets extremely nitty-gritty and is functionally a whitelist.
You can't just throw up some false walls and call it a day. Even if you could, your landlord's lease terms probably don't let you sublease like that.
The problem is, most of these retail spaces are actually vacant, despite massive job and housing growth. But why? Because the retail spaces are simply too large. These spaces are big enough to seat 100-200 people, but most restaurants, even popular ones, will not seat that many people most of the time, so they end up paying rent on real estate that is not being fully utilized the vast majority of the time, and then they go belly up because they can't afford the rent.
One recent trend that has kind of taken us back to the roots of small restaurant square footage is the food hall, where many small setups share one large communal seating area. Another is the food truck, with no seating, minimal rent costs, and the entire operation fits in a parking space. There is a great irony when I've been to a food truck serving food out of the parking lot of an under-occupied strip mall, because the strip mall spaces are simply too large.
It also doesn't help that mom-and-pops are not exactly the most attractive tenants for commercial lending; better to ink a long-term contract with a sure bet like a bank branch or a national chain.