How Do You Successfully Invest in Strip Center Retail Properties in 2025?

Strip center retail investing represents one of the most stable and reliable opportunities in commercial real estate, yet many investors overlook this asset class in favor of flashier alternatives. With the right strategy, demographics, and location analysis, strip centers can deliver consistent cash flow and compelling returns. In this comprehensive guide, we break down everything you need to know about investing in multi-tenant open air retail properties, based on insights from commercial real estate veteran Matt Blair of REI Capital Growth.

Quick Answer: The Strip Center Retail Investment Strategy

Strip center retail properties—grocery-anchored shopping centers with 5-6 additional retail locations—offer reliable cashflow through credit-rated tenants on triple-net leases. Target properties in the $5-30 million range within secondary markets, focusing on stabilized assets with strong demographics (75k+ household income), diversified labor markets, and 8-9% cash-on-cash returns. Success requires thorough site inspections, understanding traffic patterns, and securing properties with staggered lease rollovers.

What Are Strip Center Retail Properties and Why Do They Matter?

Strip center retail, also known as multi-tenant open air retail, consists of shopping centers where the entrance to each retail location is exterior to the building. As Matt Blair explains, “We like multi-tenant open air retail. Think grocery store with five or six other retail locations attached to it.”

These properties are ubiquitous across America. There are <a href=”https://www.statista.com/statistics/927882/number-shopping-centers-us/” target=”_blank”>over 100,000 strip centers</a> located in every small town and suburban area nationwide. Unlike enclosed malls or lifestyle centers, strip centers serve essential daily needs, making them remarkably resilient assets.

The appeal lies in their fundamental characteristics. Most strip centers feature credit-rated tenants on triple-net leases, meaning tenants cover property taxes, insurance, and maintenance. This structure creates a reliable cashflow stream with minimal landlord responsibilities. As Blair notes, “Strip center retail can be a very, very reliable cashflow stream because you have credit rated tenants. You have potentially medium and longer term leases, and these credit rated tenants, they pay their leases very consistently.”

For investors looking to build wealth through <a href=”https://www.therealestateinvestingclub.com/cash-flow-wealth-building-guide/”>consistent cash flow strategies</a>, strip centers offer an institutional-quality asset class accessible to individual investors.

What’s the Optimal Price Range for Strip Center Investments?

One of the most strategic decisions in strip center investing is targeting the right valuation band. REI Capital Growth focuses specifically on properties valued between $5 million and $30 million—a sweet spot that minimizes competition from both ends of the market.

Blair explains the competitive advantage: “In that range, you’re going to be competing with less institutions because institutions like to write bigger checks and you’re competing with less individuals because only so many people can write a check big enough to buy a $12 million property.”

This middle market creates pricing inefficiencies that savvy investors can exploit. Properties below $5 million attract every mom-and-pop investor and house flipper, driving up competition and prices. Properties above $30 million bring institutional capital with deeper pockets and aggressive underwriting.

The $5-30 million band also provides meaningful scale. A $10-15 million strip center typically includes a strong grocery anchor plus 5-8 in-line tenants, offering both stability and diversification within a single asset. This is significantly different from smaller retail investments, which often lack the anchor tenant stability that drives traffic and lease renewals.

For investors building their <a href=”https://www.therealestateinvestingclub.com/build-real-estate-wealth-working-full-time/”>real estate wealth</a>, understanding these market dynamics helps identify where true opportunity exists versus where you’re simply competing in an efficient market.

Which Markets Should You Target for Strip Center Retail?

Location selection can make or break a strip center investment. REI Capital Growth follows a clear geographic strategy: secondary markets within 45 minutes to 90 minutes of major metropolitan areas.

“We stay away from primary and tertiary. We like secondary markets,” Blair states. “Think suburban markets to major metros, 45 minutes to an hour and a half away from major metros, not too far out, but not too close.”

Why Secondary Markets Outperform

Secondary markets offer several compelling advantages for strip center investors:

Lower Competition: While institutional capital floods into primary markets like Manhattan, downtown Los Angeles, or the Chicago Loop, secondary markets see far less institutional activity. The properties are often too small or too geographically dispersed for large REITs and institutional funds.

Better Yields: Cap rates in secondary markets typically run 75-150 basis points higher than comparable properties in primary markets, translating directly to better cash-on-cash returns.

Reduced Risk from Urban Issues: One of the biggest lessons from recent years is how urban centers face unique challenges. “You deal with what’s happening in Seattle—there’s homeless encampments and now we can’t get anybody to lease our space. That’s a newer phenomenon but it only happens in those downtown Metro locations,” Blair notes.

Top Secondary Markets for 2025

When asked about his favorite markets, Blair highlighted several standout opportunities:

Birmingham, Alabama: “It’s got a really strong, diverse labor market, really strong demographics and household income. It’s kind of sleepy. People don’t really go down to invest there.”

Nashville, Tennessee: The surrounding communities around Nashville offer strong demographics without the pricing pressure of the urban core.

Louisville, Kentucky: An overlooked market with solid fundamentals and attractive pricing.

The Midwest Belt: Wisconsin, Michigan, and Illinois (outside Chicago) continue offering value opportunities with stable populations and diverse employment bases.

These markets share common characteristics: growing or stable populations, diverse labor markets, strong household incomes, and less investor competition than Sun Belt darlings like Austin, Phoenix, or Miami.

For more insights on <a href=”https://www.therealestateinvestingclub.com/shopping-centers-best-investment-2025/”>why shopping centers are attracting smart money in 2025</a>, understanding market selection is critical.

What Demographics and Location Factors Matter Most?

Beyond broad market selection, drilling down to specific site selection requires rigorous demographic and location analysis. REI Capital Growth evaluates several key metrics before moving forward on any property.

Critical Demographic Indicators

Household Income Above $75,000: This threshold ensures residents have sufficient disposable income to support the retail mix typical of strip centers. “We look for household income above 75,000 on average,” Blair confirms.

Diversified Labor Markets: Single-employer towns create concentrated risk. “If there’s a single employer that’s over 50% of the employment market, that’s a little bit risky, because if they have layoffs, it’s going to affect such a large percentage of your base,” Blair explains. Look for markets with employment spread across multiple industries and employers.

Traffic Counts and Foot Traffic: While drive-by traffic counts matter, actual foot traffic provides more valuable data. Blair mentions using <a href=”https://www.placer.ai/” target=”_blank”>Placer.ai</a>, a service that tracks foot traffic into retail locations. “You can see how many people are actually moving around the center on any given day. Traffic counts are great, but foot traffic is actually even more important.”

The Make-or-Break Location Factors

Location analysis extends well beyond demographics. Physical site characteristics often determine success or failure.

The Right Side of the Street: This seemingly small factor carries enormous weight. “If you’re on the wrong side of the street, it’s a totally different valuation than if you’re on the other side of the street, because there’s easier access to ingress or egress or terrible access because you happen to be on the wrong side of the street,” Blair emphasizes.

Consider a strip center on the far side of a busy four-lane road from the primary traffic flow. Drivers may see the center daily but rarely attempt the dangerous left turn across traffic required to access it. Meanwhile, an identically tenanted center on the near side with easy right-turn access could see three times the customer volume.

Surrounding Neighborhood Quality: The areas immediately adjacent to a strip center significantly impact its performance. “The retail center can back up to a neighborhood that has a really high crime rate and that bleeds onto the property,” Blair warns. Even excellent demographics in the broader trade area cannot overcome immediate proximity to high-crime areas.

This is precisely why investors focused on <a href=”https://www.therealestateinvestingclub.com/best-commercial-real-estate-investing-podcasts/”>commercial real estate investing</a> must conduct thorough on-site due diligence rather than relying solely on data.

How Do You Conduct Proper Due Diligence on Strip Centers?

The difference between successful and failed strip center investments often comes down to the quality of due diligence. Unlike multifamily properties where you can reasonably assess condition and operations in a few hours, retail properties require extended, multi-faceted investigation.

The Full-Day Site Inspection Protocol

REI Capital Growth’s approach to site inspections goes far beyond the typical broker tour. “When we visit to site inspections, we kind of hang out all day to kind of see how the traffic flows, see where people come and go,” Blair reveals. “Sometimes a strip center looks beautiful on paper and you go and you sit there and there’s just nobody coming.”

This extended observation allows investors to identify patterns that don’t appear in any offering memorandum:

• Morning rush patterns (7-9 AM): Are coffee shops and breakfast spots drawing consistent traffic?
• Lunch traffic (11 AM-1 PM): Do office workers or nearby residents visit during lunch?
• After-work patterns (4-7 PM): Does the grocery anchor draw commuters stopping on the way home?
• Weekend dynamics: Are families visiting on Saturday mornings? Is Sunday dead?

Time of day matters enormously. A center may look bustling during Saturday morning grocery shopping but completely dead every weekday, indicating a limited customer base.

Talking to Everyone on Site

Professional due diligence means gathering intelligence from people who know the property best—those who work and shop there daily.

“You go in, you just buy a coffee, you start talking to people and you learn a lot about the property, more than you could ever learn on an offering memorandum,” Blair advises. Specific people to engage include:

Tenant Employees: Workers at the Starbucks, grocery store, or sandwich shop interact with customers daily. They know whether traffic is increasing or declining, which tenants are struggling, and what issues affect the property. Simple questions like “How do you guys like this space?” often yield valuable insights.

Police Officers: “A lot of times if you’re there all day, you’re going to see a police car. And so you just kind of go and chat them up,” Blair suggests. Officers can speak candidly about crime issues, problem tenants, or neighborhood concerns that won’t appear in any crime statistics database.

Mail Carriers: Postal workers visit the property daily and observe long-term patterns. They notice which units remain vacant longest, which businesses receive heavy package volume (indicating healthy sales), and general property conditions over time.

City Officials: “You go down to city hall and go to the planning board and kind of just chat up whoever’s available,” Blair recommends. Planning department staff know about upcoming road projects, new competition being developed, zoning changes, or economic development initiatives that could impact the property.

The key insight: “If you call, you will not get a tenth of the information you’ll get if you’re down there. You gotta have boots on the ground. That’s a key component.”

What Lease Structure and Tenant Mix Should You Target?

The financial performance and risk profile of a strip center depend heavily on lease structures and tenant composition. Understanding these elements separates successful investments from value traps.

Triple-Net Lease Structures

REI Capital Growth focuses exclusively on triple-net (NNN) or double-net structures. “Triple net, all triple net is what we’re focused on,” Blair confirms. In triple-net arrangements, tenants pay base rent plus their proportionate share of property taxes, insurance, and common area maintenance (CAM).

This structure offers several advantages:

Predictable Operating Expenses: With tenants covering most variable expenses, landlord costs remain minimal and predictable.

Built-in Inflation Protection: As taxes, insurance, and maintenance costs rise with inflation, these increases pass through directly to tenants rather than squeezing landlord margins.

Lower Management Burden: The landlord isn’t responsible for day-to-day maintenance decisions or cost overruns.

For smaller in-line tenants who may not initially have triple-net leases, Blair’s strategy is clear: “When they turn over, we look to bring them up into the similar structure as the others.” This gradual transition improves the property’s risk profile and investor returns over time.

Staggered Lease Rollovers

One critical yet often overlooked factor is lease rollover timing. “If all of our leases are rolling over in year three, maybe that’s not the right lease mix that we’re going for. You like to have staggered lease rollovers,” Blair explains.

Concentrated lease rollovers create several problems:

• Refinancing Risk: If multiple major leases expire shortly before a refinancing event, lenders may discount the property’s value or require higher rates.
• Revenue Cliff Risk: Losing multiple tenants simultaneously could temporarily crater income.
• Leasing Cost Concentration: Tenant improvement costs and leasing commissions spike when many spaces turn simultaneously.

Ideal lease schedules spread expirations across 5-10 years, ensuring steady income while creating regular opportunities to mark rents to market.

The Anchor Tenant Strategy

Grocery-anchored centers form the core of REI Capital Growth’s strategy. National or regional grocery chains provide several benefits:

Traffic Generation: Grocery stores drive multiple weekly visits from local residents, creating exposure for in-line tenants.

Stability: Food retail proved remarkably resilient during COVID-19 and previous recessions. People must eat, making groceries relatively recession-resistant.

Credit Quality: Most grocery anchors are credit-rated entities, providing financing advantages and default protection.

Beyond groceries, Blair values tenant diversity. “If it’s all mom and pops, that adds a little bit more risk than if you have a couple of larger, national tenant rated tenants as the anchors that adds more value.”

An ideal tenant mix might include: a regional grocery chain (30,000-40,000 SF), a pharmacy or dollar store, a quick-service restaurant, a bank branch, a nail salon, and 2-3 other service-oriented small businesses. This combination serves essential needs while spreading risk across multiple credit profiles and business types.

What Returns and Exit Strategies Should You Expect?

Strip center retail investing offers compelling returns when executed properly, though the return profile differs from value-add multifamily or development plays.

Target Cash-on-Cash Returns

REI Capital Growth targets stabilized properties generating 8-9% cash-on-cash returns. “Our cash on cash return is coming in a little bit over eight, eight and a half percent is what we target,” Blair states.

This return reflects several factors:

Current Interest Rate Environment: With debt currently around 6.5%, an 8.5% cash-on-cash return provides reasonable leverage while maintaining a safety margin. “We’re always going to have a spread between the cap rate and the interest rates,” Blair confirms.

Cap Rate Targets: The fund seeks properties trading at 7.5% to 7.75% cap rates—a 100-150 basis point spread over debt costs. “So seven and a half, maybe seven and three quarter cap rate,” Blair notes.

Conservative Leverage: These returns assume moderate leverage, typically 60-70% loan-to-value. Conservative leverage protects against market downturns while still amplifying equity returns.

For investors comparing alternatives, 8-9% cash-on-cash returns might seem modest compared to aggressive value-add plays promising 15-20% IRRs. However, strip center returns come with several underappreciated advantages:

Tax Efficiency: Unlike cash-distributed returns, REI Capital Growth reinvests cashflow into additional properties. “One of the major benefits of investing in commercial real estate are the tax benefits. But if you’re receiving passive income, you’re leaving a lot of those tax benefits on the table,” Blair explains. Reinvestment strategy defers taxes while compounding growth.

Lower Risk Profile: Stabilized strip centers with credit tenants carry far less execution risk than value-add or development projects.

Reliable Income: Triple-net leases with credit tenants provide exceptional income stability compared to operating-intensive property types.

The Compounding Growth Model

Rather than distributing income and forcing capital recycling decisions onto investors, REI Capital Growth employs a reinvestment strategy: “We buy a property, it’s kicking off cashflow and we reinvest that into another property. That allows us to diversify the portfolio holdings, as well as have additional depreciation to write down all of that new income. It creates a compounding effect.”

This approach mirrors Robert Kiyosaki’s Rich Dad Poor Dad philosophy on a commercial scale. Each new acquisition adds:

More Depreciation: New properties generate new depreciation schedules, sheltering the growing income stream from taxation.

Greater Diversification: Additional properties spread risk across more tenants, locations, and lease expirations.

Compounding Returns: By reinvesting rather than distributing, the fund allows returns to compound over extended periods.

“It grows and grows and grows over long periods of time,” Blair emphasizes. For investors with longer time horizons and focus on wealth accumulation rather than current income, this structure offers powerful advantages.

When to Hold vs. When to Sell

Every investor faces the hold-versus-sell decision. Blair’s perspective comes from experience: “The only regret I have with that property is that we sold it. We sold it for a huge gain, but our whole methodology now is why would you sell anything that’s crushing? Keep it, keep it, keep it as long as you can.”

This philosophy shift emerged from selling a 2012 acquisition that “knocked the cover off the ball.” While the sale generated substantial profits for investors, Blair recognized the opportunity cost of losing a high-performing asset.

The new approach: retain exceptional assets indefinitely, using them as a permanent income and appreciation foundation while deploying new capital into additional acquisitions.

This strategy only works with proper structure—hence the fund model versus individual syndications. “We had a syndication of family and friend investors. We had to return capital to them,” Blair explains. Fund structures provide the longer-term capital required for true buy-and-hold strategies.

What Are the Biggest Mistakes to Avoid in Strip Center Investing?

Learning from others’ mistakes costs far less than making your own. Blair shares a painful lesson about market selection that shaped his current strategy.

The Tertiary Market Trap

“We bought a strip center in a tertiary location and for the first several years, it crushed—over 10% cash on cash return. We were doing really, really well with it,” Blair recalls. The property’s strong initial performance masked underlying structural weaknesses.

“We lost a major tenant in that property and we assumed the releasing, our releasing assumptions were built off of our experience in secondary markets. And tertiary markets are quite a bit different. It is very hard to backfill lease space in a tertiary market.”

The space “sat open for a very, very long time,” ultimately forcing a sale at a loss. “After a certain point, we just had to cut our losses and vacate that property. It was ultimately a loss on what we bought it for and what we sold.”

Several factors make tertiary markets problematic:

Limited Tenant Pool: Smaller markets offer fewer replacement tenants when spaces go dark. National retailers may not have enough local population to justify a location, while local businesses may lack capital or credit quality to fill 3,000-5,000 SF spaces.

Property Management Challenges: “Third party, nationally recognized property management companies don’t necessarily work in every tertiary market. They work in some of them, but they work in almost every secondary market,” Blair notes. Finding competent local management in small markets proves difficult.

Financing Constraints: Lenders view tertiary markets more skeptically, potentially limiting financing options or requiring higher rates and lower leverage at acquisition and refinancing.

The lesson: “That’s kind of why we stay away from those. Maybe one day in the future tertiary markets can entice us with high cap rates again, but we’re going to do that extremely cautiously.”

Other Critical Mistakes

Beyond market selection, several other errors can sink strip center investments:

Insufficient Due Diligence: Relying on offering memorandums and third-party reports without extensive site visits and local intelligence gathering leads to unpleasant surprises.

Ignoring Physical Access: Visibility doesn’t equal accessibility. Properties with high drive-by counts but poor ingress/egress often underperform despite appearing strong on paper.

Underestimating Tenant Improvement Costs: Releasing vacant spaces requires capital for improvements and leasing commissions. Inadequate budgeting for these costs strains returns.

Overlooking Environmental Factors: Strip centers with gas stations or dry cleaners face potential environmental liabilities. Thorough Phase I and II environmental studies are essential.

How Do You Find Strip Center Deal Flow in 2025?

Deal sourcing separates active investors from those sitting on the sidelines. REI Capital Growth’s approach reflects the realities of the middle-market strip center space.

The Broker Relationship Strategy

“Because we’re buying stabilized properties in that middle asset price valuation band, we are basically buying publicly listed properties,” Blair explains. This distinguishes strip center investing from residential or smaller commercial deals where off-market sourcing dominates.

“We have very deep relationships with basically all the major retail brokers across the country. And they’re just constantly sending us deals. Our deal flow organically from publicly listed properties is very robust.”

This broker-centric approach makes sense for several reasons:

Institutional Asset Class: Strip centers in the $5-30 million range typically trade through established commercial brokers rather than direct seller marketing.

Broker Motivation: Brokers want to close deals with qualified, reliable buyers. By proving themselves as strong closers, REI Capital Growth earns preferential treatment when brokers have attractive listings.

Efficiency: Rather than spending resources hunting off-market deals, the firm focuses on underwriting and closing the best opportunities from substantial inbound deal flow.

“We get to basically pick the cream of the crop and it’s a beautiful thing,” Blair notes. “Because we’re reinvesting and constantly buying and buying and buying, we’re developing a reputation in the market of being a great closer.”

This reputation creates a virtuous cycle: successful closings lead to more broker relationships, which lead to better deal flow, which leads to more acquisitions.

Managing Deal Flow Volume

With abundant deal flow comes a new challenge: efficiently filtering opportunities to identify the best investments.

“The nice thing for us is that valuation band kind of cuts out a lot of the noise,” Blair explains. “If the NOI is in the right band, that falls into one bucket. If it falls into these buckets, then it goes into the next one. So we have some initial target benchmarks that thin the herd.”

The filtering process focuses on metrics readily available in initial teasers:

1. Property Value: Does it fall in the $5-30M range?
2. NOI: Does the net operating income suggest appropriate cap rates?
3. Location: Is it in a target secondary market?
4. Anchor Quality: Does it have a grocery or similar strong anchor?

“Instead of eight deals a week, we’re really digging into one or two or three deals a week,” Blair states. This focused approach allows thorough underwriting of legitimate opportunities rather than superficial review of everything that crosses the desk.

The tradeoff: “We probably frankly missed some great opportunities in doing that. But we just kind of zoom down to our credit box as fast as possible.”

For investors building their own <a href=”https://www.therealestateinvestingclub.com/off-market-real-estate-success/”>deal sourcing systems</a>, Blair’s filtering framework provides a proven template.

What’s the Market Outlook for Strip Center Retail in 2025-2028?

Looking ahead, Blair’s perspective on retail real estate reflects both optimism and caution about broader market dynamics.

The Price Puzzle

“I really don’t think that the real estate market has experienced the price shock that the increase in interest rates should have created,” Blair observes. From 2022-2024, interest rates rose from near-zero to 6.5-7%, yet strip center pricing remained remarkably resilient.

“People were still transacting” despite higher debt costs, keeping valuations elevated. Blair attributes this to several factors:

Capital on the Sidelines: Institutional and private capital raised during the low-rate era needed deployment, maintaining demand even as rates rose.

Replacement Cost Floor: New construction costs increased dramatically, providing a floor under existing property values.

Inflation Hedge Demand: Real estate’s inflation-hedging characteristics attracted capital seeking protection from rising prices.

The Three-to-Five Year Forecast

“I tend to think that they’re going to drive interest rates back down, which is going to cause prices to even balloon up a little bit,” Blair predicts. “As rates go down, the prices will go up even more.”

This outlook suggests a continued seller’s market for quality strip center assets. “The asset bubble could get worse,” Blair warns. “For the next three to five years, I kind of think things are moving in the up direction.”

He notes a potential tension: “I think they should [stop cutting rates], but I don’t see them stopping. And so I think the real estate market is going to continue to thrive for the next several years.”

For investors, this environment suggests:

Act Now: Waiting for a major price correction may mean missing years of cashflow and appreciation.

Focus on Fundamentals: In frothy markets, rigorous underwriting becomes even more critical. Buy properties that make sense at today’s prices and rates.

Lock in Long-Term Debt: If rates decline, locking in permanent debt at current levels could prove advantageous if inflation resurges.

Stay Disciplined: Don’t stretch on metrics like cap rate spreads or debt service coverage ratios just to get deals done in a competitive environment.

Blair’s macro outlook aligns with his micro strategy: focus on stabilized assets with strong fundamentals in good locations, and let time and compounding do their work.

Getting Started with Strip Center Retail Investing

Strip center retail offers a compelling combination of stable cashflow, tax efficiency, and long-term appreciation potential. Success requires targeting the right properties in secondary markets, conducting thorough due diligence with extended site visits, securing triple-net lease structures, and maintaining appropriate capital reserves for tenant turnover.

The keys to successful strip center investing include:

• Focus on the $5-30 million sweet spot where institutional and individual competition is minimal
• Target secondary markets 45-90 minutes from major metros with strong demographics
• Ensure household incomes exceed $75,000 and labor markets are diversified
• Conduct full-day site inspections and talk to tenants, police, mail carriers, and city officials
• Verify physical access and traffic patterns support the location
• Secure grocery-anchored properties with staggered lease rollovers
• Structure deals for 8-9% cash-on-cash returns with conservative leverage
• Consider long-term hold strategies rather than forced sale timelines

For investors ready to explore this asset class, developing broker relationships and building systematic underwriting processes will determine long-term success. As Blair demonstrates, strip center retail may not be the most glamorous real estate sector, but it’s proven to be one of the most reliable for building lasting wealth.

Want to learn more about the REI Club Podcast? Click here: <a href=”https://www.therealestateinvestingclub.com”>https://www.therealestateinvestingclub.com</a>

Want to grow your business with ads? Join our sister company here: <a href=”https://www.kaizenmarketingagency.com”>https://www.kaizenmarketingagency.com</a>

Want to invest in Gabe’s next deal? Click here: <a href=”https://www.kaizenpropertiesusa.com”>https://www.kaizenpropertiesusa.com</a>

Want to join our community of active investors? Click here: <a href=”https://linktr.ee/gabepetersen”>https://linktr.ee/gabepetersen</a>