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Global Investment Leader Bets Big on Retail

Katie Grissom, Head of U.S. Retail and Mixed-Use at Nuveen Real Estate
Katie Grissom, Head of U.S. Retail and Mixed-Use at Nuveen Real Estate

The reports of retail’s death are greatly exaggerated.

After a decade of headlines advertising the oncoming “retail apocalypse,” the vertical is experiencing a renaissance, and savvy investors are poised to reap the rewards. TRD sat down with Katie Grissom, Head of U.S. Retail and Mixed-Use, at global investment leader Nuveen Real Estate, to learn how this hardy sector has defied naysayers and reinvented itself once again.

Predictions of Doom

A collection of factors created a retail bubble over the last ten years, resulting in over-development and unsustainable rent levels. There was an ‘if you build it, they will come’ mentality that was not underpinned by financially healthy retailers or fundamentals. Another major contributor was the presence of lower interest rates and major capital inflows into the retail ecosystem from all parts of the food chain (venture capital, credit, private equity, real estate, etc.) in the last cycle. 

At the same time, there were huge shifts in consumer demand with the perception that Millennials would behave differently than previous generations, both of which tempered growth prospects for the sector.

Between the looming threat of e-commerce growth, America’s over-retailed landscape being saddled with outdated concepts and overleveraged outlets, and then the massive disruption to consumers further accelerated by COVID, there were plenty of warning signs hanging over the sector as a whole.

“In terms of relative performance,” says Grissom, “retail was losing to the shifting structural tailwinds in favor of industrial and multifamily sectors.” 

Although investors were still interested in strong grocery-anchored centers, there was general avoidance of street retail, power centers, and malls where there were perceived risks around losing big box and department store anchors. 

As a result, investors generally shied away from retail over the last five years, strategically underweighting the vertical across their portfolios.

Out With the Old, In With the New Reality

Paradoxically, the pandemic kickstarted the latest round of retail recovery. “COVID helped accelerate the shedding of some of the dead wood from the forest,” explains Grissom, “which has allowed retail to flourish.”

Naysayers were correct that retailer health was eroding as consumer behavior was changing. Simply put, there was a lot of poor retail that was no longer relevant to today’s consumers. Over the last 10 to 15 years, consumers have embraced technology, fostering an overwhelming need to “have it now,” whether “it” was ordering a cup of coffee, buying a new pair of shoes, or live streaming the latest movie. 

“All of this has created what I like to call ‘convenience culture’ around how we live our lives,” says Grissom. 

The pandemic accelerated the need for retailers, restaurants and other service businesses to meet the customer the only way they could: digitally. In some respects, that forced retail and mixed-use tenants to advance their digital platforms and implement ways to support their customers, including curbside pick-up, Buy Online Pick-up In Store (BOPIS), and connectivity beyond the store. From social media and websites to other lifestyle avenues, retailers found ways to take up more of consumers’ mindshare and stay top of mind even when customers weren’t physically inside a store or restaurant, efforts that strengthened retail’s market share.

Add to this that Millennials have proved to be resilient consumers, even as they finally move on to major milestones like buying homes in the suburbs or starting families.

“They want their kids to be able to go to convenient, high-quality schools, and they have more flexible work arrangements, making time for them to more regularly go to the grocery store, restaurants, stores, or to a workout class. These preferences are driving decision-making across all aspects of their lives,” says Grissom. “So, it’s this perfect storm of positivity for retail, and retail is finally a place where it can position itself to give consumers the experience they want.”

Retail’s Bright Future

Grissom notes that the vertical has shown strong fundamentals over the last two years, particularly across open-air and neighborhood retail segments. Vacancies today are sitting at or near record lows across open-air retail formats, and they are expected to remain low due to limited new construction. As reported in Nuveen Real Estate’s U.S. Retail Report, vacancies at neighborhood retail centers ended the first quarter of 2024 at 5.8%, according to CoStar. Rent growth also remains healthy at 3.9%. 

The outlook remains sunny due to steady demand for space and limited new supply. Today, rents are 35% to 40% below the replacement cost needed to justify new construction, and financing for new projects is almost impossible given the cost of debt and the outlook on interest rates, notes Grissom. According to CoStar, deliveries on new neighborhood centers over the last 12-month period ending the first quarter of 2024 totaling 5 million square feet, just 0.2% of inventory, while demand for space was almost three times higher with net absorption at 13.3 million square feet. 

In addition, retail sales per capita have been growing over the past 10 years at the same time as retail gross leasable area (GLA) per capita has been declining. “Those two things happening in tandem further exemplify the strength of the retail sector,” adds Grissom. 

Leveraging Strong Fundamentals

As covered in their latest Retail Research thought piece, neighborhood retail is one of Nuveen Real Estate’s top consensus investment picks for 2024, and the inefficiency of capital markets is creating a good runway of buying opportunities. Nuveen Real Estate is actively looking for both on and off-market assets while other high-profile investors are on the sidelines due to various issues, including the cost of debt, a soft fundraising environment and lack of liquidity for some of the larger traditional assets. 

“Our research team feels very strongly that there is a window of opportunity to find compelling deals at favorable pricing given the current market,” says Grissom. 

In particular, the firm is laser focused on demographics first and finding dominant trade areas where growing retailers want to locate. For example, Nuveen Real Estate recently acquired a Fresh Market-anchored shopping center in the Atlanta suburb of Peachtree City that has strong population growth, high household incomes and good daytime population drivers. It’s a market that a lot of big national brands are looking to get into but haven’t been able to find space in the path of their customers, adds Grissom.

Four key trends influencing Nuveen Real Estate’s retail investment strategy are the consumer’s need for convenience, migration to the suburbs, evolving work-from-home strategies, and an understanding of where retailers are planning to expand (and why). “We like retail that is in the path of travel for the customer and close to where they live and work, authentic mixed-use,” says Grissom. 

Take the Nuveen Real Estate-owned, Whole Foods-anchored retail center in Franklin, Tennessee that is occupied by major brands and is adjacent to several well occupied office buildings and apartment buildings. Retailers increasingly want to catch their target customers when they are already at the grocery store or in an otherwise frictionless location centered around convenience; that way, they make the most of their time and don’t have to get back in their car or go very far to finish their errands, shopping, or appointments.

“That is a huge shift in how retailers and even office users or other occupiers of space are thinking which is important because relative to anyone in the real estate industry, they are one or two degrees closer to the consumer and how the consumer is thinking,” says Grissom. “And if we want to be on the cutting edge of tomorrow’s customer, we have to be closer to retailers, users of space, and their strategies.” To learn more about Nuveen Real Estate’s Retail expertise, visit