What Are The Most Profitable Retail Investments in Commercial Real Estate?

September 13, 2023   |   Retail
a strip mall with mixed retail

Retail could be a great commercial real estate investment. When navigating this industry, here are four retail investments worth considering.

If you're on the hunt for the best retail investments in the commercial real estate market, you're in the right place. We've analyzed the data and found four high-potential retail property types you should consider for your investment portfolio.

Let’s dive in.

High Street Retail

High street retail properties are those found on the main commercial streets in urban areas. They are home to a wide variety of stores, from high-end boutiques to popular fast-food chains.

High street retail can be among the best retail investments for a few key reasons:

  • Foot traffic. They attract heavy foot traffic, driving sales for tenants and ensuring steady rental income for property owners.
  • Accessibility and visibility. These areas are typically well-served by public transport, increasing accessibility and visibility.
  • Ability to charge higher rental rates. The prestige of being on the high street can allow for higher rental rates.

Conversely, high street retail is often a more significant up-front investment due to its prime location.   

Neighborhood Shopping Centers

Neighborhood shopping centers can be great retail investments. Typically anchored by a grocery store or drugstore, they serve the daily needs of the surrounding community and tend to remain stable, even in challenging economic conditions.

Here's why they make sense:

  • Essential products. They benefit from regular, consistent patronage due to the essential nature of the products and services provided.
  • Foot traffic. The anchor tenant draws in foot traffic, benefiting the smaller stores and the overall center’s profitability.
  • Customer loyalty. Given their community-based nature, they often have strong support from local customers.

Before investing in a neighborhood shopping center, consider the anchor tenant you want to attract, consider the average income level of the area, as well as the other stores already in the center. For instance, if you buy a neighborhood shopping center with pawn shops and consignment stores as current tenants, you're not likely to attract a store like Fresh Market or Whole Foods.

Outlet Centers

Outlet centers are another potentially profitable retail investment. These centers offer discounted products from renowned brands, attracting bargain-hunting customers.

Here's why outlet centers are among the top retail investments:

  • Economic resilience. They draw in consumers looking for deals, a consistently strong market even in economic downturns.
  • Niche market. They offer unique products, creating a distinct retail experience that attracts repeat customers.
  • Volume. Outlet centers are usually sprawling, which results in high customer volume and — potentially — substantial rental income.

Keep in mind: These centers often need to be far enough away from full-price retail locations to avoid cannibalizing sales, but close enough to a large consumer base to ensure healthy foot traffic.

Mixed-Use Properties

Mixed-use properties combine retail, residential, and sometimes office space in a single development. By integrating multiple uses, these properties leverage diverse income streams, making them excellent retail investments.

Here are some reasons why:

  • Blended income. They provide a blend of rental income from both residential and commercial tenants.
  • Built-in community. They create a community where residents can live, work, and shop, boosting the viability of the development’s retail portion.
  • Diverse revenue streams. They can offer a hedge against economic downturns due to their varied revenue streams.

Mixed-use properties incorporate a range of different spaces — retail, residential, and potentially office or other uses. Each component has unique needs and challenges regarding management, maintenance, leasing, and regulatory compliance.

If an investor is new to one or more types of these spaces, there may be a steep learning curve. Therefore, investors must spend significant time and effort learning to manage these diverse spaces or hire a qualified property management team.

Finding the Right Retail Property Management Team

A commercial real estate brokerage, SVN | Saunders Ralston Dantzler can help you find the right retail investment and then manage the property for you. Investing in commercial retail space requires consistent, detailed management to produce a profitable return on your asset. We recognize that you, as an investor, don't always have that kind of time.

Our property management team utilizes industry-leading approaches that maximize your assets’ value. With value enhancement at our core, we remain experts in strategic planning, operations, and development.

We help owners and investors of various retail assets, such as regional malls, strip centers, high street retail, urban mixed-use, and neighborhood centers.

To learn more about how we can help, call 877.518.5263.

Disclaimer: This article is only intended for informational purposes. SVN | Saunders Ralston Dantzler does not guarantee the sufficiency of the content in or linked to from this article or that it complies with current law. The content within this article is not a substitute for legal advice or legal services. You should not rely on this information for any legal purpose without consulting a licensed lawyer.

Berlinte Hiresh
Berlinte is a distinguished real estate broker with over two decades of experience. Her expertise extends to and beyond retail, industrial, and other commercial properties. Upon joining SVN | Saunders Ralston Dantzler, Berlinte was able to further establish herself within the Orlando, Florida and ...