Why Global Investment Giant Nuveen Is Doubling Down on Grocery-Anchored Retail

After years of disruption and uneven recovery across the retail real estate landscape, one niche subsector is quietly proving to be a star performer grocery-anchored, open-air retail centers. According to Chad Phillips, Global Head of Nuveen Real Estate, this particular category of neighborhood shopping space represents one of the most resilient and overlooked investment opportunities in commercial property today.

“We’ve leaned heavily into this open-air, convenience-based strategy over the past two years,” said Phillips, who oversees more than $140 billion in Nuveen’s global real estate equity and debt portfolio. “It’s a model that has survived every disruption from e-commerce to the pandemic and continues to deliver stable returns.”

The Rise of the “Essential” Retail Center

These are not sprawling malls or luxury shopping complexes. They’re the everyday neighborhood centers anchored by a grocery store, flanked by a pharmacy, coffee shop, dry cleaner, or pizza place the kind of destinations people visit multiple times per week. Vacancy rates for these properties have fallen from 7.8% in early 2016 to just 4.4% as of early 2025, according to CoStar Group data.

“It survived COVID. It survived the Amazon effect,” Phillips said. “In strong locations, our grocery-anchored portfolio is now more than 95% leased, and any vacancy we do see is filled quickly due to strong tenant demand.”

Nuveen’s strategy capitalizes on the simple power of necessity-based retail stores offering goods and services that can’t be easily replaced by online shopping. The centers’ accessibility, convenience, and proximity to residential neighborhoods make them ideal for both shoppers and investors.

Undersupply and Smart Discipline

The U.S. retail real estate market, long criticized for oversupply, has seen a dramatic correction. Developers have built fewer new retail properties in the past decade, a trend accelerated by the shift toward e-commerce and tighter lending standards. That restraint has created a structural undersupply, particularly in grocery-anchored centers.

“We’re buying at cap rates that are very attractive compared to replacement costs,” Phillips explained. “These are bite-sized, high-quality deals easy to buy, easy to sell, and built on a resilient business model. The total returns are compelling and risk-adjusted.”

Phillips added that while mega-malls and high-end retail have seen renewed foot traffic, they lack the liquidity and flexibility that make smaller open-air centers so appealing. “You can’t easily sell a mall,” he noted, “but you can move a $20 or $30 million strip center relatively quickly.”

Investor Interest Returns to Retail

Retail allocations in institutional portfolios once represented more than 30% of total real estate investment, but that share plunged to around 10% after years of poor returns. Now, as the subsector stabilizes, investors are taking a second look.

“We’re not seeing a flood of money coming back just yet, but the tide is turning,” Phillips said. “So far this year, we’ve raised $1.4 billion in equity for our convenience-based retail strategy. With leverage, that gives us about $2.5 billion in buying power — and investors are definitely paying attention again.”

These investors range from large pension funds to private wealth managers seeking steady, income-generating assets that can hedge against inflation and market volatility.

Challenges on the Horizon

Even so, the sector is not without risk. After five years of strong rent growth and record-low vacancies, momentum has begun to cool. CoStar’s national director of retail analytics, Brandon Svec, recently noted that grocery-anchored centers have seen vacancies tick up for three straight quarters, although they remain near historic lows.

“After a long run of steady demand and rent increases, we’re seeing fundamentals normalize,” Svec said. “However, the overall supply of new retail space remains limited, which should help keep the market balanced.”

Economic uncertainty and fluctuating consumer confidence could also influence performance. Spending habits tied to wage growth and employment stability are critical to sustaining traffic for neighborhood retailers.

Nuveen’s “Path of Convenience” Strategy

For Nuveen, success in this space depends on selective investing targeting properties in affluent, growing communities with stable demographics. Phillips said Nuveen’s ideal centers are located in areas with average household incomes above $100,000, strong job markets, and a predominately millennial, well-educated customer base.

“It all comes down to convenience,” he explained. “We look for assets that are literally in the path of daily life places where people stop to grab dinner, fill prescriptions, or pick up groceries on their way home. Those are the locations that stay relevant no matter what the economy does.”

While competition for quality assets has increased, Phillips maintains that there’s still room for attractive acquisitions. Nuveen continues to target low double-digit returns, aided by limited new construction and enduring consumer demand for local, service-oriented retail.

“Even in a slower economy, people still need to shop for essentials,” Phillips added. “That kind of reliability makes this subsector one of the few bright spots in commercial real estate right now.”

The Bottom Line

As traditional malls struggle to reinvent themselves and office towers face mounting vacancies, grocery-anchored strip centers have quietly emerged as one of the most durable assets in real estate. Their combination of convenience, necessity, and community integration offers a rare blend of stability and upside a formula that global investors like Nuveen are betting will pay off for years to come. For direct financing consultations or mortgage options for you visit 👉 Nadlan Capital Group.