Introduction

Retail real estate has undergone tremendous transformation over the past decade. While many investors continue to associate retail with enclosed malls and department stores, today’s institutional investors and DST sponsors are increasingly focused on a more resilient segment of the market: necessity-based retail and triple-net leased properties.

“Retail isn’t disappearing—it is evolving,” says Al DiNicola. “The strongest retail assets today tend to be those providing goods and services consumers need on a regular basis rather than discretionary purchases.”

For cash investors and 1031 exchange investors, retail continues to offer attractive opportunities for income generation, diversification, and passive ownership through Delaware Statutory Trust structures.

Understanding Today’s Retail Landscape

Retail encompasses a broad spectrum of property types, including:

  • Neighborhood shopping centers
  • Grocery-anchored centers
  • Power centers
  • Lifestyle centers
  • Drugstore locations
  • Quick-service restaurants
  • Automotive service centers
  • Standalone retail properties
  • Essential service retail

The modern retail environment has become increasingly focused on convenience, accessibility, and necessity-driven consumer spending.

“The question investors should ask is not whether retail is viable,” notes DiNicola. “The question is which retail formats are best positioned for long-term success.”

The Rise of Necessity-Based Retail

One of the most significant shifts in retail investing has been the movement toward necessity retail.

Necessity retail tenants generally provide products or services consumers purchase regardless of economic conditions.

Examples may include:

  • Grocery stores
  • Pharmacies
  • Medical clinics
  • Auto parts stores
  • Discount retailers
  • Home improvement stores
  • Convenience stores
  • Farm and ranch supply stores

“People continue buying groceries, filling prescriptions, maintaining vehicles, and visiting healthcare providers during both strong and weak economic periods,” explains DiNicola.

This consistency has made necessity retail increasingly attractive to institutional investors.

Triple-Net (NNN) Leases: A Core Retail Strategy

Many retail DST offerings utilize Triple-Net (NNN) lease structures. Triple-Net leasing remains one of the most popular ownership structures within the retail sector.

Under a traditional NNN lease, the tenant is generally responsible for:

  • Property taxes
  • Building insurance
  • Maintenance expenses

“The Triple-Net structure shifts many operational responsibilities to the tenant, which can create a more predictable ownership experience for investors,” says DiNicola.

While lease structures vary and should always be reviewed carefully within the Private Placement Memorandum (PPM), NNN leases remain a cornerstone of many retail DST offerings.

Why Investors Like Triple-Net Properties

Several characteristics make NNN properties attractive.

Long-Term Leases

Many NNN leases may extend:

  • 10 years
  • 15 years
  • 20 years or longer

Long lease durations can provide greater visibility into future income streams.

Creditworthy Tenants

Many DST retail offerings feature nationally recognized tenants.

Examples often include:

  • Grocery operators
  • Pharmacy chains
  • Automotive retailers
  • Home improvement companies
  • Healthcare providers

“The quality of the tenant is often just as important as the quality of the real estate,” notes DiNicola.

Limited Management Responsibilities

Triple-Net properties generally require less day-to-day involvement than many other property types. This characteristic aligns well with the passive nature of DST ownership.

E-Commerce Is Changing Retail, Not Eliminating It

One of the most common concerns investors express involves e-commerce.

The reality is more nuanced.

“E-commerce has certainly transformed retail, but it has not eliminated the need for physical stores,” says DiNicola.

In many cases, physical and digital retail now work together.

Examples include:

  • Buy online, pick up in store (BOPIS)
  • Same-day fulfillment
  • Product returns
  • Inventory distribution
  • Customer service support

Many retailers now utilize physical stores as mini-distribution centers supporting online sales.

The Retail Categories Most Resistant to E-Commerce

Certain retail categories continue demonstrating resilience because their services are difficult or impossible to digitize.

These include:

Service-Based Retail

  • Hair salons
  • Nail salons
  • Fitness centers
  • Medical clinics
  • Veterinary practices

Food and Beverage

  • Restaurants
  • Coffee shops
  • Ice cream shops
  • Specialty food concepts

Automotive Services

  • Tire centers
  • Oil change facilities
  • Auto repair businesses

Healthcare Retail

  • Pharmacies
  • Urgent care facilities
  • Dialysis centers

“The more personal interaction required, the less vulnerable the tenant typically is to online competition,” explains DiNicola.

Grocery-Anchored Retail Continues to Perform

One of the strongest segments within retail remains grocery-anchored shopping centers. Consumers continue making frequent grocery visits regardless of economic conditions.

Grocery anchors may drive traffic to:

  • Restaurants
  • Service providers
  • Pharmacies
  • Specialty retailers

“Traffic generation remains one of the key advantages of grocery-anchored centers,” says DiNicola.

The daily necessity of grocery shopping creates recurring customer visits that benefit surrounding tenants.

Tenant Mix Matters

Successful retail centers often combine multiple tenant categories.

A diversified tenant roster may include:

  • Grocery stores
  • Medical tenants
  • Restaurants
  • Personal service providers
  • Financial institutions
  • Discount retailers

The goal is creating a destination that attracts repeat visits throughout the week. “The best retail centers become part of the community’s daily routine,” notes DiNicola.

Geographic Diversification in DST Retail Offerings

One advantage of many DST retail offerings is diversification.

Rather than owning one retail location, investors may gain exposure to multiple properties across several states.

A typical retail portfolio DST may include:

  • Grocery stores
  • Pharmacies
  • Auto parts locations
  • Healthcare facilities
  • Discount retailers

located throughout different markets.

“Geographic diversification can help reduce exposure to localized economic challenges,” says DiNicola.

Retail Trends Shaping 2026

Several trends continue influencing retail investment decisions.

Sun Belt Population Growth

Population growth throughout:

  • Florida
  • Texas
  • Tennessee
  • North Carolina
  • South Carolina
  • Arizona

continues supporting retail demand.

Omnichannel Retailing

Retailers increasingly integrate:

  • Online sales
  • Physical locations
  • Delivery services
  • Mobile applications

into a unified customer experience.

Healthcare Retail Expansion

Medical and wellness-oriented retail tenants continue expanding.

Discount Retail Growth

Value-oriented retailers remain attractive as consumers seek convenience and affordability.

Convenience-Based Shopping

Consumers increasingly prioritize speed and convenience over large destination shopping trips.

What DST Sponsors Look For

When evaluating retail opportunities, sponsors frequently analyze:

Tenant Credit Quality

Can the tenant continue meeting lease obligations over the long term?

Lease Structure

Are there rent escalations, renewal options, and favorable lease terms?

Property Location

Does the location serve growing populations and strong demographics?

Market Fundamentals

What are the area’s employment, income, and population growth trends?

Real Estate Quality

Is the property positioned to remain competitive throughout the investment hold period?

Risks Investors Should Consider

Retail investments are not without risk.

Potential considerations include:

  • Tenant bankruptcies
  • Lease rollover risk
  • Changing consumer behavior
  • New competitive developments
  • Economic slowdowns

Investors should review all risks disclosed within the PPM before investing.

Why Retail Remains Relevant

Despite the growth of e-commerce, retail remains a critical component of the economy.

Consumers still require:

  • Groceries
  • Healthcare
  • Automotive services
  • Restaurants
  • Essential household goods

“As long as consumers need goods and services, well-located retail properties will continue to play an important role in the economy,” says DiNicola.

The challenge is identifying the right retail categories and the right tenants.

Conclusion

Retail real estate has evolved significantly over the past decade, with necessity-based retail and Triple-Net leased properties emerging as some of the most attractive segments for institutional and DST investors.

Supported by strong tenant demand, long-term lease structures, population growth, and consumer necessity, many retail assets continue to offer compelling opportunities for passive investors.

“Today’s retail story is really about necessity, convenience, and service,” concludes DiNicola. “Investors who focus on those fundamentals often find retail remains a valuable component of a diversified real estate portfolio.”