Remember when everyone declared retail dead? Malls were closing, e-commerce was going to eat everything, and owning a strip center was financial suicide. That narrative peaked around 2019. It was wrong then, and it’s spectacularly wrong now. Neighborhood retail and grocery-anchored strip centers are posting the best fundamentals in a decade — and almost nobody is paying attention.
The Data That Killed the Narrative
Retail net absorption — the measure of how much space is being leased versus vacated — has been positive nationally for seven consecutive quarters, according to CoStar Group. Neighborhood retail centers and strip malls are leading the recovery, driven by tenants that e-commerce simply cannot replace.
Think about who occupies a typical neighborhood strip center: a dental practice, a nail salon, a Chipotle, a physical therapy clinic, a Great Clips, a veterinary office, a daycare center. These are businesses that require a physical storefront in proximity to their customers. Amazon can’t deliver a root canal. DoorDash can’t replace a haircut.
The tenant mix in neighborhood retail has fundamentally shifted over the past decade — from goods-oriented retailers (who compete with e-commerce) to service-oriented tenants (who don’t). Medical offices, restaurants, fitness studios, salons, childcare, and quick-service food now dominate the tenant roster in well-located strip centers. These tenants have high retention rates, sign long-term leases, and invest in buildouts that make them sticky.
Supply Is Essentially Zero
Here’s the part that makes the investment thesis compelling: nobody is building new retail. According to Cushman & Wakefield and CoStar data, new retail construction is at or near historic lows. Developers shifted capital to multifamily and industrial over the past decade, and the retail development pipeline has not recovered.
In most secondary markets, there has been virtually zero new retail construction since 2019. Existing centers that are well-located, well-tenanted, and well-maintained have no new competition — and won’t have any for the foreseeable future. That scarcity is a powerful driver of both occupancy and rent growth.
Grocery-Anchored: The Gold Standard
Grocery-anchored neighborhood centers sit at the top of the retail hierarchy. The grocery anchor provides consistent foot traffic, and the in-line tenants (restaurants, services, medical) benefit from that traffic. Grocery-anchored centers maintain occupancy rates of 95%+ in most markets and trade at cap rates of 6.5-7.5% in secondary markets — offering an attractive yield spread over multifamily and industrial.
According to Marcus & Millichap’s retail research, grocery-anchored centers have the lowest vacancy, highest tenant retention, and most predictable cash flows of any retail subtype. They’re also the most insulated from e-commerce disruption — groceries remain one of the least penetrated categories in online retail.
The $5M-$20M Opportunity
Institutional retail buyers — REITs and pension funds — focus on large-format grocery-anchored centers valued at $30M+. The $5M-$20M segment is dominated by smaller neighborhood centers, un-anchored strip malls, and single-tenant retail assets that fly under the institutional radar.
These properties offer compelling economics: stable cash flows, service-oriented tenant bases, low capex requirements, and cap rates 100-200 basis points wider than comparable multifamily assets. The risk is low (no new supply, sticky tenants) and the yield is attractive — exactly what income-oriented investors should be targeting.
The challenge is financing. Many lenders still carry the “retail is dead” bias and either avoid the asset class entirely or underwrite it punitively. Borrowers need a capital partner who understands that a 95%-occupied grocery-anchored strip center with 7-year weighted average lease terms is a different animal than a dying regional mall.
Have a Deal That Doesn’t Fit the Box?
Neighborhood retail, strip center, or grocery-anchored acquisition in the $5M-$20M range? QuadBlock Capital lends where others won’t — with 24-48 hour LOIs and 10-20 day closings.
Sources & References
- CoStar Group — Retail net absorption trends, new supply pipeline data, vacancy by subtype
- Cushman & Wakefield — Retail construction at historic lows, market research
- Marcus & Millichap — Grocery-anchored center performance data, cap rates, tenant retention