Why Grocery Anchored and Open Air Retail Should Remain a Safe Harbor In 2026

Mixed signals characterized real estate in 2025, with early‑year volatility shaping perceptions across the sector. Against that backdrop, grocery‑anchored and open‑air retail centers remained among the industry’s most recession-resistant categories in the industry; benefiting from necessity‑based tenancy, reliable foot traffic, and insulation from discretionary spending swings. Short‑term softness in the first half stemmed primarily from mid‑market retail closures and bankruptcies, while inflation and tariffs added further strain on consumers and tested the limits of less-resilient operators.

Momentum returned in the third quarter, with many now viewing the downturn as a short-term correction tied to store retirements, not a fundamental reset. Leasing traction strengthened, demand normalized, and early‑year volatility was increasingly framed as a brief pause rather than a turning point. As stability took hold, these retail assets reaffirmed their position among the most resilient in the sector.

Fundamentals Remain Strong

Retail fundamentals held firm despite disruption from store closures. Cushman & Wakefield expects national vacancy to remain no higher than 5.8% by yearend, with groceryanchored and openair retail centers continuing to outperform that benchmark. Leasing activity improved through Q3 as vacant space backfilled and market balance returned. While yeartodate absorption remains slightly negative, the softness reflects oneoff closures and portfolio adjustments by retailers such as Joann Fabrics and Party City, not a broad pullback in tenant demand.

Consumer behavior reinforces that stability, with most of the pullback concentrated in discretionary categories. That shift continues to favor groceryanchored and openair centers, where repeat visits, weekly necessity trips, and steady foot traffic remain core drivers of performance.

Rent growth has followed suit. According to CBRE, asking rents increased 0.4% quarter over quarter and 1.8% year over year in Q3 of 2025. Limited new supply is reinforcing those gains. Only 5.1 million square feet were delivered in Q3, which brought yeartodate completions to 13.8 million square feet, which was well below prepandemic norms and roughly 80% lower than mid2000s construction levels. Elevated costs and tighter credit conditions continued to constrain development, helping preserve occupancy, support pricing power, and limit oversupply risk.

Taken together, steady foot traffic, disciplined supply, and consumer prioritization of everyday goods positioned groceryanchored and openair retail centers to enter 2026 from a place of strength. In a market defined by uncertainty, these assets continue to deliver something rare: dependable performance across shifting economic conditions. They’re not simply holding ground; they’re reinforcing their standing as one of the most durable formats in the retail landscape.

The Durability of GroceryAnchored and OpenAir Retail Centers

Groceryanchored and openair retail centers continue to outperform many other retail formats because they’re closely tied to everyday consumer behavior. These properties function as weekly destinations, sustaining consistent traffic even as discretionary spending softens. While households may defer specialty purchases, demand for groceries, prescriptions, and daily services remains steady, supporting reliable visitation patterns.

The merchandising mix within these centers further supports durability. Uses such as fitness, entertainment, urgent care, medical services, familyoriented retail, and foodandbeverage, increase visit frequency and extend dwell time throughout the week. Together, these complementary tenants reinforce the same fundamentals driving performance: when consumer spending prioritizes essentials, necessitybased formats tend to outperform.

The Evolving Deal Structure

Despite their strong foundation, groceryanchored and openair retail centers are being managed with continued discipline. Owners and tenants are approaching lease structures more thoughtfully, balancing downside protection with achievable upside. Lease terms have become more flexible and datadriven.

Structures are increasingly aligned around performance. Lighter base rent profiles paired with salesbased upside reduce barriers for tenants while preserving participation for owners when stores perform well. This approach has proven effective in a market that favors stability but still rewards growth.

Tenant improvement strategies have adjusted accordingly. Buildout requirements now span from modest refreshes to more capitalintensive configurations for medical and specialty fitness uses. Landlords are allocating TI capital selectively, with an emphasis on tenants that drive consistent traffic and longterm occupancy. The objective remains on leasing decisions that support performance across market cycles, not shortterm occupancy gains.

Capital Follows the Fundamentals

Investment activity continues to respond to these fundamentals. Retail transaction volume increased 13% year over year in Q3 2025 to nearly $112 billion, rebounding from a slower first half amid continued interestrate uncertainty. While multifamily and industrial remain core components of institutional portfolios, groceryanchored and openair retail centers are receiving renewed attention for their necessitybased demand and cashflow stability.

Beyond their defensive characteristics, these assets benefit from predictable traffic patterns, convenient access, and layouts designed around routine shopping behavior. With new construction limited and leasing activity improving, groceryanchored and openair retail centers are well positioned as capital considers deployment opportunities heading into 2026.

Final Thoughts

If 2025 reinforced any theme, it’s that groceryanchored and openair retail centers remain structurally resilient. The sector absorbed store closures, stabilized as the year progressed, and regained momentum, all while supply remained constrained and operating metrics held steady. These properties weren’t immune to market disruption, but they demonstrated durability through it.

Looking ahead to 2026, the advantages remain consistent: disciplined supply, resilient demand, evolving tenant mixes, and continued confidence from both operators and investors. In an environment where clarity remains elusive, groceryanchored and openair retail stands out for its alignment with everyday consumer behavior. These assets aren’t defined by shortterm trends, but by fundamentals that continue to perform across cycles.

To learn more about retail fundamentals, consumer spending patterns, and sector outlook, check out the KBS Insights article, What’s Next for Retail Real Estate?