Market volatility has returned—and with it, some uncertainty and opportunity across commercial real estate. After signs of stabilization last fall, economic shifts and persistent fiscal pressures have reignited concerns and opened doors of opportunity, particularly in the retail sector. The path forward in the retail real estate space demands strategic risk management.
Traditional approaches like flight to quality, mixed-use development, and leveraging anchor tenants are well-worn paths. An emerging smarter variation is gaining traction and demonstrating remarkable resilience: shadow-anchored retail centers. These smaller retail centers, strategically located near major anchors, benefit from high foot traffic without the complexity and overhead of owning a traditionally anchored parcel. In today’s climate, adapting with precision is key, and shadow anchor positioning may offer the stability and upside investors need to navigate what’s next.
Challenges and kryptonite
Commercial real estate does not respond well to uncertainty. Between March 21 and April 11, 2025, retail saw the sharpest spike in spreads across sectors, underscoring renewed risk and the urgent need for strategic risk management.
Tightening credit now collides with fading hopes for rate cuts. The Federal Reserve System’s March 2025 projections showed unemployment inching to 4.4% and core inflation stuck at 2.8%—well above the 2% target. Despite a federal funds rate of 4.25%-4.5%, earlier expectations of two more cuts before 2026 are now in doubt.
That was before rising tariffs reignited trade tensions. As companies pass on higher costs, inflation risks deepen as consumer confidence is waning.
The Conference Board’s Consumer Confidence Index has dropped 17% since November 2024. Short-term expectations just hit a 12-year low, signaling potential recession. The University of Michigan’s Sentiment Index fell 13% in just two months between December 2024 and February 2025.
With consumer spending driving 69% of GDP, the stakes are high. Forecasts now peg the chance of recession at 45–60%, with some leaders warning of a deeper crisis if conditions worsen.
Meanwhile, the retail sector is bracing for impact: nearly 10,000 store closures are projected this year, far outpacing fewer than 8,000 anticipated new store openings. Vacancy is set to rise unlocking long-constrained growth opportunities while leaving some spaces at risk for chronic vacancy. For CRE executives, the signals are clear: retail faces mounting structural and macroeconomic pressure. Strategic adaptation isn't optional. It’s essential.
Shadow anchor advantages
Placer.ai data confirms sustained consumer interest in the types of businesses that traditionally serve as retail anchors. But securing those high-credit, high-visibility tenants comes at a premium that drives up project costs and financial pressure.
Shadow-anchored centers offer a strategic alternative while still attracting quality tenants. Located near major anchors, they benefit from the high traffic without the high price tag. Lower acquisition costs free up capital for improvements or portfolio diversification.
These properties also often draw resilient local businesses. They are less demanding in negotiations and expectations than national chains and more adaptable in downturns.
Avison Young client, Terry Richardson, CEO of Heritage Partners recalls from the pandemic that, "Every one of our 125 mom-and-pop tenants paid in full after recovering from mandated government closures. When your business puts food on the table, you find a way."
- Is the site close enough to a true anchor?
- Will traffic overflow support the shadow center?
- What value-add strategies can differentiate the space?
Shadow anchors aren’t a fit for every project—but for the right ones, they offer compelling upside with strategic flexibility.
Retail's stength and resilience
Despite headwinds, retail continues to outperform expectations. Multiple studies highlight the sector’s durability through economic turbulence. Even as consumer sentiment softens, retail trade and food services sales remain strong—demonstrating the sector’s ability to weather volatility and sustain demand.
While short-term volatility and variability is expected, foot traffic remains resilient. Year-over-year gains were reported across groceries (+0.6%), department stores (+2.8%), and home improvement (+1.3%), according to Placer.ai. Even superstores, down 3.6%, are now showing signs of renewed growth and reinforcing retail's underlying strength despite macroeconomic pressure.
Through every disruption, opportunity remains. Strategic risk management is how smart investors capture upside while mitigating downside. And that’s where shadow anchors come in.
Interested in learning more about shadow anchors and other retail strategies? Our experts are happy to answer your questions!
Jonathan Hipp
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- Principal, U.S. Capital Markets
- Head of U.S. Net Lease Group
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- Capital Markets Group
- Net Lease
Meghann Martindale, CLS
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- Principal, Director Market Intelligence, Retail
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- Retail
- Market Intelligence
