Retail Real Estate: Resilient, Relevant and Ready for Growth

Why Retail Remains a Compelling Investment Opportunity

Retail is increasingly standing out as the sector to watch. With fundamentals strengthening, pricing resetting to more compelling levels, and capital flowing back in, the sector is gaining clear momentum. That strength reflects retail’s ability to adapt to changing consumer behaviors and broader economic forces.

“Retail has endured predictions of an e‑pocalypse, the rise of digital giants, and even a global pandemic—yet it has never stopped evolving,” says Shane Carter, Director of Capital Markets at Cushman & Wakefield. “Each disruption has pushed the industry to reinvent itself, proving that retail’s greatest strength has always been its resilience and its ability to meet consumers wherever they are, in any moment.”

That resilience is now being driven by necessity-based tenants, the expansion of experiential and wellness concepts, and the growing importance of physical stores within unified commerce strategies. For consumers, this means more convenience, more engagement, and deeper connection. At the same time, retail’s evolution toward mixed-use environments and lifestyle destinations is attracting both tenants and capital. These formats consistently draw foot traffic and strengthen brand loyalty, leading to healthy sales and strong tenant performance.

Together, these dynamics create income streams with credible growth potential, offering investors a compelling combination of strong current yield with meaningful growth optionality.

Strong Fundamentals, Tight Supply, and Stabilizing Capital Markets

Retail is leading the price recovery. The MSCI RCA CPPI shows the retail price index up 2.4% year-over-year (YOY) as of November 2025, well ahead of the overall index’s 1.6% growth. In December, retail prices declined 0.5% from November, but remain on an upward trend from a year earlier. This positive trajectory signals renewed investor confidence. Investment activity is also improving, with individual asset sales up 20% YOY and cap rates stabilizing after a period of volatility. Private-market performance reinforces this momentum: The NCREIF Property Index has posted four consecutive quarters of positive total returns, with retail outperforming other major property types over the trailing year.

This momentum is underpinned by a clear shift in fundamentals. Several structural advantages are positioning retail as a preferred choice for institutional investors, moving many from “retail-curious” to meaningfully committed. Institutions are increasingly reallocating capital from other sectors as retail fundamentals appear to be strong with no softening in sight. New development remains largely uneconomic in many markets, and even after five years of strong rental rate growth across both anchor and shop space, significant mark-to-market opportunities persist as owners regain control of space.

“Expanding retailers are facing a new reality of pricing pressure by landlords and, in many markets, anchor rents look like yesterday’s shop rents,” says Mark Gilbert, Vice Chair of Cushman & Wakefield’s Retail Investment Advisors platform.

The investment case for retail is being reinforced by several key factors:

• Relative Pricing and Yield Premium: Retail offers attractive entry yields compared to other property types. Cap rates typically range from mid-single digits for prime assets to low-double digits in secondary markets, providing investors with strong income potential alongside opportunities to benefit from market repricing.
  
  
  
  
• Limited New Supply: Retail construction starts are at multi-decade lows, and CoStar reports availability at 4.8%, the lowest on record, with vacancy near historic lows. This supply-demand imbalance, combined with the gap between current market rents and rents required to justify new development, continues to limit competitive deliveries and support rent growth for existing centers. ICSC projects that meaningful new supply will not arrive until late 2026–2027, reinforcing near-term advantage for existing assets and giving investors confidence in pricing stability.
• Tenant Mix Evolution: Retail is no longer dominated by soft goods. Experiential concepts, food and beverage, health and wellness, and entertainment uses are driving traffic and income durability. At the same time, some retailers are also leveraging local stores for last-mile fulfillment, further embedding physical stores into unified commerce strategies.
• Inflation-Hedge Characteristics: Leases with contractual escalations and percentage rent clauses provide income growth tied to sales performance and inflation, appealing to institutional investors seeking real-asset hedges in today’s environment.
• Diversification and Macro Tailwinds: After years of heavy concentration in industrial and multifamily, investors are actively rebalancing portfolios. Retail offers diversification across cash-flow duration, tenant credit, and consumer-driven demand. Goldman Sachs Asset Management’s July 2025 outlook highlights durable income and attractive entry points as construction activity remains constrained and valuations stabilize.

Debt Market Confidence

Debt markets are echoing this optimism, with recent financings highlighting strong lender appetite for retail assets. High-profile transactions across formats and geographies underscore confidence in the sector’s durability and income stability. Blackstone recently secured a $2.8 billion CMBS backed by 85 grocery-anchored centers, with the portfolio 95.6% leased. Similarly, Bridge33 completed a $460 million CMBS refinancing for a portfolio of 12 retail assets across nine states, supported by 91.4% occupancy.

At the high end of the spectrum, NorthPark Center obtained a $900 million CMBS loan alongside a $300 million mezzanine loan, allowing the Nasher Family to buy out JPMorgan Asset Management. In the largest financing transaction of the year, Ala Moana in Honolulu secured a two-year, $2.42 billion interest-only loan for one of the highest-grossing malls in the United States.

Together, these transactions reflect confidence in retail’s stability and income-generating potential, reinforcing the sector’s position as a preferred investment vehicle.

Demand Drivers: Community, Wellness, and Experience

Consumers are increasingly drawn to retail environments that blend convenience, health, and social engagement. They are seeking places where they can live, work, shop, and dine—driving greater demand for adaptive reuse and mixed-use strategies across retail real estate.

Properties that integrate wellness-oriented anchors, including outpatient medical uses, fitness concepts and medspas, are benefiting from consistent daily traffic and longer-term leases. At the same time, entertainment and dining offerings are activating evenings and weekends, transforming retail centers into vibrant community hubs.

Grocery-anchored visitation remains particularly resilient, often exceeding pre-pandemic levels. This frequent, repeat traffic drives cross-shopping behavior that supports surrounding retailers and reinforces the overall performance of the center.

"Tenant mix is no longer just a leasing strategy, it is a value strategy,” says Kristen Pash, Senior Director of Shopping Center and Mall Leasing and Development at Cushman & Wakefield. "As consumer expectations rise in the post-pandemic landscape, shopping centers must offer more than apparel and soft goods. Grocery, elevated dining, entertainment, wellness, medical and technology uses are increasingly replacing traditional department stores, creating more frequent and meaningful reasons to visit while strengthening long-term ownership value.”

Examples of Successful Retail Investments

Across the country, legacy malls and underperforming retail centers are being repositioned into dynamic, mixed‑use destinations that better align with today’s consumer preferences.

• Dallas: The former Valley View Center is being transformed into Dallas Midtown, a 430‑acre district blending residential, office, hotel, retail streets, and green space.
• Atlanta: Edens is redeveloping North DeKalb Mall into a walkable community hub anchored by grocery, dining, entertainment, offices, and new housing.
• Detroit: Lakeside Mall is undergoing a $1 billion redevelopment that will introduce multifamily, hotel, office space, and an open‑air “downtown” retail district.
• New Jersey: Burlington Center Mall is being converted into a mixed‑use campus centered on 250,000 square feet of outpatient medical and wellness services.
• Seattle: Northgate Station now integrates the Seattle Kraken Community Iceplex alongside extensive medical and rehabilitation uses, expanding the site’s role as a community anchor.
• Rochester: Market Place Mall is evolving with significant medical and wellness additions, including outpatient orthopedics, physical therapy, and a new YMCA facility as part of a broader reimagining effort.
• Scottsdale: Scottsdale Fashion Square provides another example of strategic reinvestment, driving relevance and performance. Macerich invested $300 million across two phases to elevate the property’s luxury positioning, attracting iconic brands such as Louis Vuitton, Gucci, Hermès, and Van Cleef & Arpels, alongside acclaimed dining concepts like Nobu, Élephante, Catch, and Din Tai Fung. These enhancements transformed the center into a dominant luxury and experiential destination, materially increasing sales and reinforcing the value of targeted capital investment.

Together, these projects demonstrate how retail real estate continues to evolve toward formats centered on convenience, wellness, experience, and community, while delivering durable cash flow and meaningful value creation for investors.

Retail real estate offers a rare combination of yield, adaptability, and long-term relevance. Supported by strong fundamentals, evolving consumer demand, and increasingly supportive capital markets, the sector provides investors with stable cash flow today and upside potential tomorrow. In an environment where shifting consumer behavior continues to redefine the rules of commerce, retail stands out as the asset class to watch.

“Across our platform we are seeing deeper bid sheets, more aggressive terms, and buyers who don’t want to lose out on an acquisition over a few BPS,” adds Gilbert. “Investors are bidding with conviction that wind will remain at their back for the foreseeable future.”