Retail Centers / Strip Malls

Retail investing covers ownership of retail property, from neighborhood and grocery-anchored shopping centers to single-tenant net-lease buildings occupied by national chains. The net-lease (triple-net or NNN) structure is central to much of it: the tenant pays property taxes, insurance, and maintenance in addition to rent, leaving the landlord with a relatively passive, predictable income stream backed by a long-term corporate lease. Retail spans a wide risk spectrum, from management-intensive multi-tenant centers to nearly hands-off single-tenant net-lease assets.

Retail has been one of the unsung success stories of commercial real estate, defying the narrative of its decline. It entered 2026 with the lowest vacancy rate of any commercial property type, driven by a healthy consumer and, critically, a dearth of new supply over the past decade. With little new construction and steady demand, quality retail space commands a premium, and the sector shows the strongest valuations in a decade across active shopping centers, excluding struggling regional malls.

Grocery-anchored and neighborhood centers are the standouts, performing well on essential, foot-traffic-driven demand, though they carry anchor-tenant risk amid grocery consolidation and e-grocery growth. The net-lease segment is reviving as valuation resets through 2024 and 2025 narrowed bid-ask spreads and brought buyers back, with W.P. Carey and others anticipating higher transaction volume in 2026, supported by an expected rise in sale-leaseback activity as merger and acquisition deals generate opportunities. Retailers are reshaping their footprints, embracing smaller spaces, the average new retail lease fell below 3,500 square feet for the first time on record, driven by restaurant and service operators, and leasing in nontraditional locations. The constraints are tenant-specific margin pressure and the bifurcation between thriving neighborhood retail and declining malls.

Retail is positioned for continued strength on the foundation of structurally low vacancy and minimal new supply. Grocery-anchored and neighborhood centers in strong demographic areas remain the most sought-after, and net-lease assets offer defensive, passive income that gains appeal as transaction activity revives and cap rates stabilize. The smaller-footprint trend and nontraditional leasing reshape demand but do not diminish the value of quality, well-located retail. The constraints are anchor-tenant and merchant-margin risks and the ongoing decline of weaker mall formats.

Retail and net-lease investing is positioned to strengthen into 2027, anchored by the lowest vacancy of any commercial sector, a decade of constrained new supply, and the strongest shopping-center valuations in years, with grocery-anchored and neighborhood centers leading and net-lease assets offering reviving, defensive passive income. While anchor-tenant risk and the decline of weaker malls are real constraints, the structural supply-demand backdrop is favorable and transaction activity is recovering. On current evidence, retail and net lease are projected to improve into 2027, rewarding investors in quality, well-located, essential-demand retail and stable net-lease assets, even as obsolete mall formats continue to struggle.