Retail Rebounds on Experiential and Necessity-Based Tenant Growth
Retail is rebounding, fueled by strengthening fundamentals, surging prices and growing investor interest as the sector adapts to shifting consumer behavior, according to a new Cushman & Wakefield report.
Retail prices have posted year-over-year gains ahead of other property types, with sales activity up about 20% and private-market returns remaining positive for four consecutive quarters, outperforming other major commercial real estate sectors, according to the report. The sector's resilience is driven by necessity-based tenants, experiential and wellness concepts and the integration of physical stores into unified commerce strategies.
Consumers increasingly seek retail environments that blend convenience, health and social engagement, as well as visiting destinations where they can live, work, shop and dine.
Properties anchored by wellness-oriented uses, such as outpatient medical services, fitness concepts and medspas, benefit from consistent daily traffic and longer-term leases, while entertainment and dining offerings activate evenings and weekends. Grocery-anchored centers continue to see resilient, often pre-pandemic or higher visitation, driving cross-shopping that supports surrounding retailers.
Across the country, legacy malls and underperforming centers are being repositioned to meet these demands. Notable projects include Dallas Midtown, transforming 430 acres into a mixed-use district and North DeKalb Mall in Atlanta, redeveloped into a walkable community hub.
Relative pricing and yield premiums make retail appealing to investors, with prime cap rates in the mid-single digits and low-double digits in secondary markets. With vacancy near historic lows, as construction starts hit multi-decade lows with no new meaningful supply increases expected until late 2026 and early 2027, rent growth and pricing stability are expected to follow.
Retail also offers inflation-hedge characteristics and portfolio diversification across cash-flow duration, tenant credit and consumer-driven demand, the report said.
Debt markets reflect this optimism. Examples include Blackstone securing a $2.8 billion CMBS backed by 85 grocery-anchored centers, while Bridge33 completed a $460 million CMBS across 12 retail assets. NorthPark Center obtained a $900 million CMBS plus a $300 million mezzanine loan and Ala Moana in Honolulu secured a $2.42billion interest-only loan. These transactions underscore confidence in retail's stability, income-generating potential and ongoing attractiveness to investors, according to Cushman & Wakefield.
Source: GlobeSt/ALM