Retail Real Estate is Proving to be a Safe Haven Despite Economic Turbulence
By: Eric Zimmermann and Mike Jordan
Retail has held up better than many expected in the post-pandemic era, but the next 12–18 months will test how robust that strength really is. The cooling labor market, rising consumer debt, and looming tariff-driven inflation pose real risks. Yet even in that more hostile environment, retail real estate possesses structural advantages—diversified tenant demand, constrained supply, and adaptability—that should allow it to endure.
Higher inflation expectations and a weakening job market pushed consumer sentiment to its lowest level since May Read More >>
NRF data showed a 5.7% increase in core retail sales, though the boost was partially driven by inflation Read More >>
Retailers estimate merchandise returns to be down slightly vs. last year, but still total nearly $850 billion Read More >>
The Checkout Lane
Source: Retail Dive, Chain Store Age, Progressive Grocer
Amazon announced the closing of 5 brick-and-mortar grocery stores this fall. The closed locations were in California and New York and follow the announcement this summer of the closing of the entire concept in the U.K. The Amazon Fresh banner has 57 stores in 8 states, along with several locations it built out and never opened, raising questions about the company’s commitment to brick-and-mortar retail.
Dollar Tree sounded upbeat about its future following the sale of the struggling Family Dollar brand at its investor day this month. The company forecasted an EPS CAGR of 12-15% over next three years. Dollar Tree also reported that comparable store sales so far this quarter are up nearly 4%.
Jack in the Box has agreed to sell the Del Taco chain to Yadav Enterprises, a leading franchisee with over 350 locations across 6 different brands. The sale price of $115 million represents a major loss for Jack in the Box, which bought Del Taco for $585 million in 2022. Del Taco currently operates 550 restaurants.
Levi’s sees a long runway to expand its direct to consumer presence in the U.S. The iconic jeans brand currently has 460 stores open and thinks there is room to double that store count, though no time frame was given. Levi’s also sees growth potential for its newest brand, Beyond Yoga, which currently has just four stores open.
McDonald’s has over 900 new locations in its pipeline set to open by 2027. The ubiquitous chain has opened or relocated 320 restaurants in the last five years as it continues to optimize its real estate footprint. Their ideal site allows for a building of 3,700-4,500 square feet on a major intersection.
Nordstrom Rack has announced the locations of 10 new stores planned to open in 2026. The stores will all be between 23,000-30,000 square feet and are primarily located in the eastern half of the U.S., with one store slated for California. Rack isn’t done growing, as it expects to have a total of 21 new stores next year while also announcing a trio of new stores slated for 2027-28 openings.
Outdoor outfitter Orvis announced plans to close 36 stores in early 2026, which is almost half of its current store fleet. Orvis says they will be focusing on wholesale and increasing their presence in stores like Bass Pro Shops and Sportsman’s Warehouse. CEO Simon Perkins attributed the change in strategy to the tariff landscape which has forced other changes such as eliminating its famous catalog and reducing corporate staff by 8%.
Ross Stores has continued its aggressive expansion plans this fall with 40 new stores opened in September and October. With the company’s fiscal year concluded, Ross has opened 90 stores this year. The bulk of the openings helped expand Ross’ presence in the Midwest and Northeast, where it is relatively new to the market; however, the dd’s Discount banner added stores in its core markets of California and Texas.
Target shareholders who were critical of the company’s decision to elevate current CEO Brian Cornell to the role of Executive Chairman have filed a proposal asking the company to require the Board Chair to be an independent director. Target’s poor performance in 2025 has raised questions about the company’s commitment to stay with internal leadership who have overseen many of the decisions that have caused the stock price to fall 35% year to date.
The Big View
Medical offices have been an increasingly important part of the tenant mix in many retail centers over the past decade. A perfect storm that includes a changing healthcare delivery network combined with more flexible attitudes towards tenant diversification have made this shift possible. The research team at Avison Young takes a detailed look at this trend in a new report. Read More >>
While official inflation data has been delayed due to the government shutdown, grocery shoppers don’t need to see a government report to know that food prices for some categories are skyrocketing. Coffee prices are leading the charge with a 40% increase over the last year, while beef and orange juice have also seen dramatic price spikes. With wallets stretched so thin, how are consumers reacting? Read more in this piece from the Wall Street Journal >>
Video of the Month: It’s spooky season once again, and that means that over 1,500 vacant boxes in shopping centers across the country will be turned over to Spirit Halloween, the seasonal superstore that accounts for 17% of all costume sales in the U.S., taking a greater market share than Walmart, Amazon, or Target. Find out more about the history of this temporary tenant and how they came to dominate the market for America’s second biggest holiday. Watch here >>
By the Numbers
From the Research Desk
Starbucks was once seen as not just a coffee chain, but a status symbol, a brand so powerful some said it had the ability to drive up home values. Starbucks locations were ubiquitous in American communities, often locating just blocks away from one another. Now, after a high-profile CEO hire and a variety of initiatives to turn the company around, the company just announced its 6th consecutive quarter of same store sales declines. Starbucks is in the midst of closing over 1,000 locations and some real estate watchers are waiting for home prices to collapse in tandem (though they haven’t stopped opening stores either, especially where they can add a drive-thru to a market without one).
While Starbucks has never been cheap, it was an “affordable” luxury within the reach of most consumers. Yet, with coffee prices skyrocketing over 40% in the last 12 months amid a strained consumer, it seems customers are no longer allowing themselves to splurge on the white and green cup. But, at the same time, looking at the fastest growing quick service restaurant chains, they are dominated by coffee and beverage specialists like Dutch Bros, 7 Brew, Scooter’s, and Biggby. Chains like McDonald’s and Dunkin have placed greater emphasis on their coffee offerings as well. Meanwhile, other “fun drinks” have captured the taste buds of Americans like boba tea and dirty soda.
These new chains aren’t always cheaper, and when they are it’s not by much, so why have Americans increasingly turned away from Starbucks if it isn’t due to price alone? One thing that sets many of the new competitors apart is that they are operating a drive-thru only model. Their real estate footprint is smaller and throughput is faster, and apparently customers find the quality to be as good or better. So, even as Starbucks tries to add more drive-thru locations they are hampered by their legacy as a “third place” where meetings of old friends and business connections take place. CEO Brian Niccol has even talked about returning to a focus on Starbucks’ status as a “third place” as part of the turnaround strategy. But if people don’t need their coffee purveyor to also be a social club, then what purpose does Starbucks serve in an increasingly competitive coffee sector? Besides, local cafes have a built-in advantage in the “third place” competition by being more in tune with neighborhood culture and giving less sterile, corporate vibes.
The story isn’t any rosier in other countries either. In China, the company’s second largest market, Starbucks has been rapidly overtaken by a native chain called Luckin Coffee that was founded in 2017 (and don’t look now, but Luckin is also setting its sights on the U.S. market!) So, Starbucks – one of the great American business success stories of the late 20th and early 21st centuries – is caught between a rock and a coffee bean, but with annual revenue north of $36 billion and near-universal presence in every city, suburb, and highway exit in America it’s too soon to count them out just yet.
Song of the Month: Sometimes an artist covers a song and they find hidden layers of meaning that were only hinted at by the original, making the song their own. Johnny Cash’s cover of Nine Inch Nails “Hurt” comes to mind, while Bob Dylan now only plays Jimi Hendrix’s arrangement of “All Along the Watchtower” in concert. In 2019, Fiona Apple recorded her version of a 1985 hit by Scottish group the Waterboys called “The Whole of the Moon”, a song that has been covered many times over the years by artists such as Prince, The Killers, Mandy Moore, and Terry Reid. However, the musical alchemy on display here prompted the Waterboys’ Mike Scott to tweet “Prepare ye to receive goosebumps” upon hearing how Ms. Apple put her entire being into this song and in turn created the definitive version. I’ve had this video on repeat all month and after listening to it a few dozen times, it loses none of its visceral power. Watch the performance here >>
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