Key Takeaways
- • Retail has been among the leaders of the real estate price recovery in both the U.S. and Europe, with NCREIF data showing retail claiming the top positions for cumulative total returns since the Q2 2022 peak, led by strip retail at 21%.
- • Roughly 480 million square feet of U.S. retail space has been demolished since 2000, and new development has been slow for more than a decade, which Hines Research views as one of the most underappreciated supply stories in commercial real estate.
- • U.S. wages have matched or exceeded inflation across virtually every consumer category except electricity, though wealth gains have accrued disproportionately to higher-income households.
- • Hines Research's Composite Capital Markets Score places U.S. retail at roughly 48 and European retail at 44, both well below the 70 threshold where markets look expensive, while Asia sits near 63.
- • Hines frames its thesis as an income and scarcity call, with returns driven by income growth, leasing, repositioning, and operational execution rather than cap-rate compression alone.
Summary
Hines has published a retail sector outlook arguing that investors should focus on assets where supply constraints, income durability, and operational upside converge. According to the firm's Hines Research team, the retail price recovery has broadened beyond open-air formats to include enclosed malls. In the U.S., NCREIF data show retail leading cumulative total returns since the sector's 2022 peak, ahead of industrial, apartments, and office. Strip retail led at 21%, followed by the retail aggregate and malls. NCREIF figures are gross of fees and are not representative of Hines fund performance.
In Europe, High Street has led the retail rebound, trailing only prime office among major property types, while shopping centers have just begun to recover. Hines favors markets with clear supply constraints and healthy consumer fundamentals, including France, Spain, Italy, and the U.K. Developed Asia has lagged, trailing office by a wide margin, with rental growth running ahead of prices. Hines reads this as a setup for recovery potential.
Hines cites the National Retail Federation's expectation of 4.4% U.S. retail sales growth in 2026, to approximately $5.6 trillion. Hines Research also found in its Atlanta portfolio work that the right grocery anchor can lift a property's rents by roughly 25% above market, an advantage that held after controlling for location. The firm identifies three risks to the thesis: inflation eroding consumers, repricing having run its course, and grocer-anchored retail becoming overcrowded. On consumer resilience, Hines finds wages broadly kept pace with prices and disposable income has outpaced inflation across U.S. income groups, though the benefit of wealth gains is concentrated among higher-income households.
On valuation, Hines states the market has not fully priced in the recovery. Its CCMS readings suggest significant upside remains, though the firm cautions that locational quality and anchor selection will be critical to avoid overpaying as capital flows rise. Hines Research's leasing health scores show relatively healthy retail leasing conditions across all three regions, with U.S. fundamentals moderating from a recent peak and Asia showing a more convincing recovery, led by Japan with Australia trailing.
In Europe, High Street has led the retail rebound, trailing only prime office among major property types, while shopping centers have just begun to recover. Hines favors markets with clear supply constraints and healthy consumer fundamentals, including France, Spain, Italy, and the U.K. Developed Asia has lagged, trailing office by a wide margin, with rental growth running ahead of prices. Hines reads this as a setup for recovery potential.
Hines cites the National Retail Federation's expectation of 4.4% U.S. retail sales growth in 2026, to approximately $5.6 trillion. Hines Research also found in its Atlanta portfolio work that the right grocery anchor can lift a property's rents by roughly 25% above market, an advantage that held after controlling for location. The firm identifies three risks to the thesis: inflation eroding consumers, repricing having run its course, and grocer-anchored retail becoming overcrowded. On consumer resilience, Hines finds wages broadly kept pace with prices and disposable income has outpaced inflation across U.S. income groups, though the benefit of wealth gains is concentrated among higher-income households.
On valuation, Hines states the market has not fully priced in the recovery. Its CCMS readings suggest significant upside remains, though the firm cautions that locational quality and anchor selection will be critical to avoid overpaying as capital flows rise. Hines Research's leasing health scores show relatively healthy retail leasing conditions across all three regions, with U.S. fundamentals moderating from a recent peak and Asia showing a more convincing recovery, led by Japan with Australia trailing.
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