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Real Estate

Surprise! Retail real estate is going strong

H.E.B. store in Main Street at Kingwood Houston, Texas

Contrary to what many believe, the retail real estate sector may offer the resilience income and growth investors are seeking. Compared to the other major real estate sectors, retail currently offers higher yields and likely less competition for investor acquisitions.

Despite shifting consumer behaviors and the threat of a potential recession, necessity retail (grocery, discount and convenience stores) has performed particularly well. Even as consumers scale back on spending, they continue to purchase essential items. And hybrid working models mean shoppers are heading to their local retail centers.

U.S. retail recovers from the pandemic 

Grocery-anchored retail is set up for solid performance, mainly because renewed retailer demand and lack of new construction have combined to produce historically low vacancy rates.

In 2022, retailers announced more store openings than closures for the first time since 2016. The U.S. saw 5,103 store openings by major retailers in 2022 versus 2,603 closures, with discount retailers leading openings.1

High demand meets slowing supply

Necessity retail is typically concentrated in local neighborhoods and community or strip centers. New supply has slowed in the past six years, with fewer new properties coming online compared to more discretionary retail centers. Meanwhile, lower vacancy rates in grocery-anchored retail have helped support rents, resulting in income for real estate investors.

European retail has proven resilient 

Macroeconomic headwinds in Europe led to continued market correction in late 2022 and early 2023, with cap rates rapidly expanding across the real estate market. While the European retail sector has not gone unscathed, it proved remarkably more resilient against capital value loss versus its office and logistic counterparts. This is partially due to the retail market’s pricing reset. As property yields soften across all sectors, European retail continues to provide elevated income returns driving strong performance and gaining increased investor interest.

Grocery-anchored and convenience retail assets (namely retail parks) offer the strongest opportunities. From an occupier side, retail parks favor a diverse mix of occupiers less reliant on fashion, which continues to be impacted by online sales. Retail parks have greater compatibility with e-commerce through click-and-collect facilities, allowing assets to form hybrid retail and logistics components driving growth. We believe that click-and-collect will remain a key strategy, and growth in this sector is expected to outperform pure channel sales.

U.S. new supply growth, % change year-over-year
Vacancy rate


Global retail markets differ due to cultural nuances and local market drivers. However, the trends supporting necessity and convenience retail investments transcend continental divides.

Investors can take advantage of disruption in the capital markets, seek discounted asset opportunities and capitalize on the stable income returns that necessity retail can provide. Traffic at these retail assets has proven resilient and defensive against e-commerce trends, reinforcing our view that not all retail is created equal.

In this issue
Real Estate Labs: Specialized spaces offer growth in innovation
Strong demand tailwinds should propel the lab sector forward over the long term.
Real Estate CityWatch | Copenhagen
Copenhagen was among the first cities in Europe to take town planning to a new level.
Real Estate When is a B better than an A?
When it comes to investments in housing, the highest quality asset doesn’t necessarily correlate to the highest return on investment.



1 Data source: Coresight Research.

The views and opinions expressed are for informational and educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions, legal and regulatory developments, additional risks and uncertainties and may not come to pass. This material may contain “forward-looking” information that is not purely historical in nature.

Such information may include, among other things, projections, forecasts, estimates of market returns, and proposed or expected portfolio composition. Any changes to assumptions that may have been made in preparing this material could have a material impact on the information presented herein by way of example. Performance data shown represents past performance and does not predict or guarantee future results. Investing involves risk; principal loss is possible.

All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such. For term definitions and index descriptions, please access the glossary on Please note, it is not possible to invest directly in an index.

Important information on risk

All investments carry a certain degree of risk and there is no assurance that an investment will provide positive performance over any period of time. Equity investing involves risk. Investments are also subject to political, currency and regulatory risks. These risks may be magnified in emerging markets. Diversification is a technique to help reduce risk. There is no guarantee that diversification will protect against a loss of income. Investing in municipal bonds involves risks such as interest rate risk, credit risk and market risk, including the possible loss of principal. The value of the portfolio will fluctuate based on the value of the underlying securities. There are special risks associated with investments in high yield bonds, hedging activities and the potential use of leverage. Portfolios that include lower rated municipal bonds, commonly referred to as “high yield” or “junk” bonds, which are considered to be speculative, the credit and investment risk is heightened for the portfolio. Credit ratings are subject to change. AAA, AA, A, and BBB are investment grade ratings; BB, B, CCC/CC/C and D are below-investment grade ratings. Real estate investments are subject to various risks, including fluctuations in property values, higher expenses or lower income than expected, and potential environmental problems and liability. Please consider all risks carefully prior to investing in any particular strategy. A portfolio’s concentration in the real estate sector makes it subject to greater risk and volatility than other portfolios that are more diversified and its value may be substantially affected by economic events in the real estate industry. International investing involves risks, including risks related to foreign currency, limited liquidity particularly where the underlying asset comprises real estate, less government regulation in some jurisdictions, and the possibility of substantial volatility due to adverse political, economic or other developments.

This document provides general tax information. Nuveen is not a tax advisor. Clients should consult their professional advisors before making any tax or investment decisions. This information should not replace a client’s consultation with a professional advisor regarding their tax situation. Neither Nuveen nor any of its affiliates or their employees provide legal or tax advice. Tax rates and IRS regulations are subject to change at any time, which could materially affect the information provided herein.

Nuveen provides investment advisory services through its investment specialists.

This information does not constitute investment research as defined under MiFID.

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