The recent ICSC Conference in Orlando, FL highlighted important takeaways, as well as general market conditions for unanchored retail centers. Yields are pulling new investors into the space, portfolios are starting to turn over, and financing trends are reshaping deal flow. With rents climbing, velocity edging up, and maturities approaching, unanchored retail is positioned for renewed momentum in 2025. 

 

Yield Drives More Buyers to Unanchored Retail

Grocery Funds and REITs Showing Interest in High Quality Strip Retail

This is the continuation of an ongoing trend entering the unanchored retail space. Institutional capital. During several of the Matthews™ shopping center division’s meetings with “pure” grocery anchored funds, they (for the first time) expressed concerns about difficulty competing in the current grocery anchored environment and relayed their interest in larger neighborhood strip centers and shadow anchored properties.

 

Portfolios and Recapitalization

Marking a possible shift in the landscape, funds and institutional owners of strips are beginning to sell and replace equity.  Given that most funds in the space have been around for less than ten years, the vast majority have been net buyers and rarely selling their centers, which have been hard fought to acquire, particularly over the last two to three years. Two notable portfolio transactions are one of 23 Atlanta MSA properties, another of 6 in Jacksonville, FL. An additional large fund recently announced its intent to recapitalize their national portfolio of strips centers, marking the second potential transaction of this nature in two years. 

 

5-Year T is the New 10-Year T

Life company and credit union loans continue to drive transactions for unanchored centers. With the 10-Year Treasury in the low 4’s, and the 5-Year in the upper 3’s, it’s easy to see why deals are being pegged to the shorter-term index.  New loans are being generated in the upper 5% to low 6% range, with 25- and 30-year amortization schedules.  Most local bank rates remain comparatively high, however recent analysis has shown some relationship banking loans are becoming very competitive, again. 

 

Trump Effect & Interest Rates

Tariffs scared many buyers and sellers in the first quarter, putting an elongated pause on the pent-up demand of dry powder on the sidelines.  Many buyers are picking up their pace to meet goals by year end, potentially bringing higher pricing and more buyers into an environment with little property on the market, in this category. The current administration’s pressure on the Fed has not caused rates to drop yet, though interest rate predictors, such as the FedWatch Tool, are predicting a 25-basis point cut at the September 17 meeting. 

 

Velocity Rising Slowly

Total strip center velocity for first half of 2025 is an estimated $7.2B nationally, compared to $6.6B in 2024 and $6.5B in 2023, respectively.  Transactions are inching up with loan maturities and slightly lower interest rates, causing a few more sales along with modest pricing improvement. However, this is still substantially lower than the high-water mark of over $13B in 2022. Matthews’™ experts remain optimistic about these metrics, noting that most investors they spoke with have larger pipelines for the second half of the year than they did in the first. 

 

Rent Continuing Upward Surge

The traditional strip center between 10-50K SF still benefits from much lower rents than their new construction “outparcel strip” counterparts.  The gap is narrowing, allowing seasoned (10-20 years old) strip centers to continue raising rents, with “mark to market” remaining an investor’s favorite weapon to drive returns. 

 

Where is the Loan Maturity Bubble?

The recent lower transaction volume has been largely impacted by owners’ favorable debt on much of their holdings in comparison with current rates. A significant number of these properties have loans approaching due dates within the next 2-3 years. However, given the recent increase in property values since the post-GFC cycle and the lower LTVs over the last 3-4 years, a healthy sell off is expected, but with little distress in strips. 

 

Key Takeaways

Unanchored retail is entering a new phase where investor demand, portfolio activity, and lending shifts converge with rising rents and upcoming maturities. While transaction velocity remains below past peaks, the steady uptick in activity and stronger pricing outlook signals a market regaining its stride. Altogether, these factors suggest that 2025 could mark a turning point for strip centers, with resilient fundamentals and a deeper pool of buyers driving the next wave of growth.