The Resilience of Retail and Emerging Trends

The retail industry, particularly necessity retail, has proven its ability to not only to withstand economic headwinds but also to thrive as a core component of well-diversified real estate portfolios. For investors and capital allocators who have distanced themselves from retail for years, now is the time to revisit the sector.

This blog serves as both a guide and forecast, highlighting why necessity retail remains undervalued and outlining top new trends shaping the future of the retail asset class.

Retail’s Comeback Story

Necessity retail, which also masquerades as “essential retail” or the older nomenclature, “neighborhood serving retail,” has emerged as a stalwart of income stability and is a key pillar in diversified real estate strategies. Unlike department stores or luxury malls, necessity retail is anchored in convenience and responsiveness to daily consumer needs, offering consistency in returns regardless of market cycles.

Here’s why this asset class is becoming indispensable for CRE portfolios:

• Income Durability: Necessity retail consistently drives stable cash flow, with grocery-anchored centers experiencing some of the industry’s lowest vacancy rates, down to 2.2% as of 2023.
• “Last-Mile” Relevance: These retail locations double as distribution hubs, offering services like Buy Online, Pick Up In-Store (BOPIS), which streamline logistics while boosting foot traffic.
• Supply and Demand Imbalance: New retail construction lags considerably behind demand. Limited new supply creates a scarcity premium, driving up rents and property values for well-located assets.

Top Trends Driving Retail’s Evolution

The remarkable resilience of retail is matched only by its capacity for evolution. Technological innovation, shifting consumer behavior, and omnichannel strategies are at the forefront of this transformation. To remain competitive and meet the demands of today’s consumers, the industry has embraced innovation across multiple dimensions. Below, we explore the top trends that are reshaping the retail landscape and defining its future.

1. Omnichannel Integration

Seamless shopping experiences have become a baseline expectation. Retailers are investing in omnichannel strategies to create unified experiences across digital and physical platforms. According to recent NielsenIQ data, 90% of shoppers now engage in some form of omnichannel shopping.

Key components of successful omnichannel strategies include:

• BOPIS (Buy Online, Pick Up In-Store) and curbside pickup, currently used by over 30% of shoppers, are bridging the gap between e-commerce and brick-and-mortar operations.
• Integrated apps that support price comparisons, loyalty rewards, and shopping list personalization.
• Seamless returns processes that blur the line between physical and digital channels.

Retailers that balance e-commerce with brick-and-mortar operations create synergies that drive growth across the board. For instance, opening a physical store often increases online sales by 6.9%—a phenomenon known as the “halo effect.”

Omni Share of Total Dollar Sales

The online share represents about a fifth (19%) of total omni sales, and those online sales are growing faster than in-store (12% vs. 0.1%)

2. Hyper-Personalization with AI

Artificial intelligence is revolutionizing consumer engagement by enabling hyper-personalization at scale. From tailored product recommendations to dynamic pricing and adaptive customer service, AI tools are refining the shopping experience to align with individual preferences. AI is already embraced by 92% of modern retailers, and those company’s that leverage data analytics and machine learning are better positioned to foster loyalty and bolster sales.

3. Social Commerce

Social media platforms are becoming pivotal retail channels with the rise of shoppable posts, live shopping events, and influencer collaborations. Retailers are meeting consumers where they spend their time—on platforms like Instagram, TikTok, and Facebook—transforming social interaction into seamless purchasing opportunities.

TikTok Percentage of CPG Dollar Sales by Category

TikTok Top Food Sub-Categories

4. Mobile-First Commerce (M-Commerce)

With mobile phones serving as the primary shopping tool for many consumers, a mobile-first approach is no longer optional. Retailers are focusing on creating streamlined mobile shopping experiences, offering features such as one-click payments, intuitive navigation, and app-exclusive deals to enhance convenience and engagement. From mobile payments to app-first shopping strategies, businesses are creating frictionless experiences for today’s on-the-go consumers. NielsenIQ notes that almost two-thirds of shoppers use their smartphones for deal-hunting, price comparisons, and accessing loyalty benefits while still in-store.

5. Experiential Retail

The appeal of physical stores remains strong, but shoppers now expect more than mere transactional visits. Retailers are responding by transforming stores into experiential hubs, offering interactive displays, personalized consultations, and community events. These experiences build brand loyalty and provide a tangible advantage over purely online competitors.

6. Advanced Loyalty Programs

Retailers are rethinking loyalty programs by incorporating gamification techniques like rewarding customers for completing certain actions to add an element of fun, subscription-based perk models, “spin-to-win” discounts, and other value-driven rewards. These innovations deepen customer relationships while incentivizing repeat business and encouraging long-term engagement.

By proactively adopting these trends, retailers are not only navigating the challenges of a competitive market but also are redefining how consumers interact with brands. The future of retail lies in its ability to blend technological advancements with human-centric experiences, delivering convenience, personalization, and purpose at every touchpoint.

Why Investors Should Reevaluate Retail

For too long, institutional investors have underestimated the potential of retail, assuming its value has diminished in an e-commerce-dominated era. However, the reality is far more dynamic. Necessity Retail has consistently demonstrated resilience, delivering reliable returns despite economic uncertainty. in addition, Retail centers have evolved into critical components of omnichannel strategies, seamlessly supporting both online and in-store sales by functioning as distribution hubs and experiential destinations.

Today’s capital markets present a unique opportunity for forward-thinking investors. With disciplined competition and attractive pricing, there is a clear “first-mover advantage” for those willing to invest in high-performing retail assets. Retail’s adaptability, combined with its ability to drive consistent foot traffic and revenue, makes it a strategic inclusion in a diversified CRE portfolio.

Now’s the Time to Invest in Necessity Retail

Necessity retail has repeatedly proven itself to be durable and stable in an otherwise uncertain real estate capital market environment. From AI-driven personalization to social commerce strategies and supply chain innovation, the retail landscape is teeming with opportunities for growth and transformation. As capital markets stabilize and new real estate portfolios are constructed, a healthy allocation to necessity retail is quickly becoming a desirable and expected component of diversified portfolios.

Looking to capitalize on opportunities in retail CRE? Partner with Lincoln Property Company. Our team provides comprehensive retail real estate services and data-driven insights to keep you ahead of market trends and guide informed investment decisions.