Everyday Essential Retail White Paper
IREI white paper written by Josh Kagan, President of Newport Capital Partners
Newport Capital Partners | April 2026
Density creates scarcity. Scarcity creates opportunity. Execution creates alpha.
Everyday Essential Retail Centers are retail properties primarily consisting of grocers, QSRs, medical users (“med-tail”), personal services, and off-price or discount merchants. Everyday Essential Retail Centers include grocery anchored or unanchored properties whose physical presence is embedded in the fabric of everyday life.
Conventional wisdom suggests that an Everyday Essential Retail Center serves a 3-to-5-mile Trade Area. In the current environment, where merchants are focused on providing essential goods and services, proximity to customers is paramount, which translates to a more concentrated Trade Area of 1-to-2-miles. This hyper-local, high-frequency demand profile creates a fundamentally different investment profile from office, industrial, or any other form of retail.
The Density Thesis
Household density is the variable that underpins the success of Everyday Essential Retail. Densely populated sub-markets position tenants to benefit from close proximity to customers while also creating inherent supply constraints due to land use density.
Grocery, med-tail, fitness, personal services, off-price merchants, and quick-service dining all depend on proximity to rooftops, serving consumer needs that recur weekly or more often. From a Tenant perspective, consumers located within one to two miles maximize a center’s value proposition. At the property level, population density determines which locations capture the daily spending of nearby households and which fall outside those established daily patterns.
A grocery-anchored center surrounded by 50,000 or more households within two miles will typically generate approximately 1.0 million annual visits to the grocer alone.1 Commuter traffic can further enhance customer volume. While certain tenants generate their own customer draw (urgent care, fitness operator, destination QSR), even those users ultimately rely on population concentration.
Tenant Demand Attributes
Over the past decade tenant demand has come overwhelmingly from non-discretionary categories. In 2025, nearly half of all new store openings by square footage were driven by discount retailers, grocery, med-tail, and convenience operators.2 Since Covid, food, med-tail, off-price, and personal services have expanded at rates that meaningfully outpace overall retail store closures. These merchants rely on proximity to the households they serve to meet recurring, everyday consumer needs.
The e-commerce growth of the past two decades came predominantly from discretionary merchant categories such as apparel, electronics, home goods, and general merchandise, which exposed malls and power centers to a tectonic shift in consumer demand. E-commerce directly impacts retail formats that rely on a 3-to-5-mile+ Trade Area where shopping is less proximity-driven and more substitutable online.
Everyday Essential Retail was never part of that competitive set as the goods and services its tenants provide cannot move online: a haircut, an urgent care visit, bi-weekly grocery run two miles from home. Post-Covid, it has become clear that the demand for Everyday Essential Retail and the threat of e-commerce is largely unrelated. Property-level performance, in terms of occupancy, has reflected that divergence.
E-commerce has ultimately proven to be additive to Everyday Essential Retail. International Council of Shopping Centers (ICSC) analyzed $848 billion in credit card transactions across more than 2,000 stores and found that opening a physical location lifts online sales in the surrounding trade area by nearly 7%.3 Conversely, closing a store reduces online sales by 11.5%, and for digitally native brands entering brick-and-mortar for the first time, the lift is nearly 14%.4 ICSC’s research further shows that every $100 spent in a physical store generates an additional $167 in online purchases with the same retailer within two weeks.5 This multiplier effect helps explain why brands that started online are now competing for physical space in the neighborhoods where their customers live – prioritizing locations with the highest household densities.
Everyday Essential Centers Supply Constraints
The positive demand fundamentals are further reinforced by supply constraints. Densely populated neighborhoods correlate with built-out infill submarkets with minimal available land parcels. The parcels that do remain are often small, oddly configured, or already zoned for residential.
Across the total open-air retail sector, developers have averaged roughly 0.5% of annual inventory additions since 2009, the lowest sustained rate of new supply in four decades.6 In 2025, construction starts fell to a record low, with the active pipeline representing just 0.3% of existing stock.7 In densely populated submarkets, anecdotal evidence suggests that retail supply has in fact contracted, as older and functionally obsolete centers have been repurposed.
New supply is further constrained by municipalities shifting priorities toward housing, particularly affordable and workforce housing, and the entitlement process for new commercial projects has become harder in most markets. Select Sun Belt submarkets may still see ground-up development where the economics pencil due to less density and therefore more available land. However, in established infill markets with high population concentrations Everyday Essential Retail Centers will compete only with existing inventory for the foreseeable future.
Everyday Essential Retail Operating Nuances
Density may lead an investor to the right submarket, but physical location within that submarket ultimately drives operational performance. Credit exposure, lease duration, and market-level supply and demand are well understood in Everyday Essential Retail. These attributes are measurable and generally priced efficiently by investors. The less obvious, but often more consequential, risk exists in the physical positioning of the center itself. Access, visibility, road orientation, signage, connectivity to surrounding rooftops, and parking configuration determine whether a center is truly woven into routine consumer behavior.
Centers located a quarter mile apart can produce materially different NOI despite identical rooftop counts, comparable anchors, and similar occupancy levels. The distinguishing factor is often the center’s precise physical location within the submarket. One sits in the natural flow of daily life: along the commute home, near school pickup, or on the path of Saturday morning errands. The other requires a deliberate trip and lacks embedded convenience.
Trade Area demographics alone do not capture how daily traffic patterns influence Everyday Essential Retail performance. For example, an Everyday Essential Retail Center on one corner of a signalized intersection may outperform a competitive property at the same intersection because afternoon commuters can easily make a right turn into one center versus a left turn crossing two lanes of traffic.
Sales data often tells the clearer story. A grocer doing $650 per square foot signals market dominance and deep integration into established customer patterns. The same grocer producing $400 per square foot in a similar demographic trade area, but has different positioning within its submarket, and signal’s structural limitations.
The signals worth watching are operational: grocer sales trends, re-leasing velocity, whether tenants push to renew early or wait until the last possible moment. The income stream in neighborhood retail moves constantly as leases roll, tenants come and go, and the neighborhood around the center shifts.
An additional Everyday Essential Retail operating nuance is the appropriate expenditure of cap-ex. Green Street estimates an average cap-ex burden of 22% of NOI across all open-air strip centers.8 Neighborhood centers sit at 19%, comparing favorably to power centers at 25%, office at 29%, industrial at 14%, and apartments at 16%.9 Disciplined, experienced operators who manage cap-ex proactively run well below the sector average.
Where the Returns Are
Institutional capital has returned to the sector after a decade of avoidance, as the strength of its fundamentals has become increasingly evident. Tight supply and stable non-discretionary demand continue to provide broad support for the sector.
Retail has been the top performing NPI property type for two consecutive years with neighborhood retail generating a 6.05% total return over the past two years according to NCREIF. 10 That compares favorably to negative (2.32%) for office, 3.58% for industrial, and 3.34% for multifamily, driven primarily by income return of 5.60%.11,12 Notably, transaction volume increased approximately 20% in 2025 underscoring renewed investor conviction. 13
Per Green Street, strip center values rose 4% in 2025, recovering to within 7% of the 2022 peak.14,15 Cap rates have compressed across all retail sectors, with grocery-anchored neighborhood centers in gateway markets now trading around 5.7%, and non-grocery-anchored properties 80 to 90 basis points wider.16,17 As entry yields compress, operational skill to drive NOI will account for a larger share of the total return.
Landlord pricing power over rents persists despite tenant occupancy cost ratios hitting a six-year high in 2024 as vacancy sits near historic lows and supply growth is forecast at 0.3% annually.18,19 Landlords in strong locations can push rents. Calibrating how far to push, by submarket and by tenant category, without crossing the line where occupancy costs threaten tenant viability, requires knowing the tenants, the trade area, and the competitive set.
As capital flows back into the sector entry yields compress and the beta gets thinner. A larger share of total return is determined from operational proficiency post-acquisition. Density creates scarcity. Scarcity creates opportunity. Execution creates alpha. The more capital that chases the sector, the more that operational expertise determines the outcome.
Notes
1. Newport Capital Partners internal analysis based on IRI / Placer.ai foot traffic data for grocery-anchored centers in trade areas exceeding 30,000 households within two miles.
2. Green Street, U.S. Strip Center Outlook, January 20, 2026, p. 18. Based on net store opening data by retailer category; discount stores, grocery retailers, and convenience operators represented approximately half of new openings by square footage in 2025.
3. ICSC, The Halo Effect III: Where the Halo Shines, December 2023. Based on analysis of $848 billion in credit card transactions across 2,103 stores in 50 states from 2019 to 2022. Opening a store boosts online sales in the surrounding trade area by an average of 6.9%.
4. ICSC, The Halo Effect III, December 2023. Emerging direct-to-consumer retailers experience a 13.9% boost to online sales after opening a new store; closing a store reduces online sales by 11.5%.
5. ICSC, The Halo Effect II, 2021. For every $100 purchased in a physical store, an additional $167 was purchased online from the same retailer within 15 days.
6. Green Street, U.S. Strip Center Outlook, January 20, 2026, pp. 22–23. Based on ICSC, INTEX, NCREIF, U.S. Census Bureau, and Green Street data.
7. Green Street, U.S. Strip Center Outlook, January 20, 2026, pp. 22–23.
8. Green Street, U.S. Strip Center Outlook, January 20, 2026, p. 28. Green Street normalized cap-ex reserves as a percentage of annual NOI.
9. Green Street, U.S. Strip Center Outlook, January 20, 2026, pp. 13, 28. Sub-property cap-ex by format (p. 13) and cross-sector comparison of normalized cap-ex reserves (p. 28).
10. NCREIF Property Index, quarterly total returns through Q4 2025. Strip retail led the NPI traditional property type sectors in total return for both 2024 and 2025.
11. NCREIF Property Index, trailing two-year annualized total returns through Q4 2025 for the retail–neighborhood subtype.
12. NCREIF Property Index, trailing two-year annualized income return through Q4 2025 for the retail–neighborhood subtype.
13. Green Street, U.S. Strip Center Outlook, January 20, 2026, p. 32. Based on transactions greater than $10 million, exclusive of portfolio deals.
14. Green Street, Commercial Property Price Index, February 5, 2026; Green Street, U.S. Strip Center Outlook, January 20, 2026, p. 34. Based on B/B+ quality assets.
15. Green Street, Commercial Property Price Index, February 5, 2026. Sector-level CPPI for B/B+ quality assets: Office (−35%), Apartments (−19%), Industrial (−13%), Strip Retail (−7%).
16. Green Street, U.S. Strip Center Outlook, January 20, 2026, p. 14. Indicative cap rates for B/B+ quality grocery-anchored neighborhood centers in gateway markets.
17. Green Street, U.S. Strip Center Outlook, January 20, 2026, p. 14. Derived from cap rate differentials between grocery-anchored and non-grocery-anchored neighborhood centers across market tiers.
18. Green Street, U.S. Strip Center Outlook, January 20, 2026, p. 25. Based on Green Street estimates of occupancy cost ratios for strip center tenants.
19. Green Street, U.S. Strip Center Outlook, January 20, 2026, p. 23. Forecast annual supply growth for strip centers through 2030.