For the first time in two years, the Federal Reserve began lowering rates—cutting the federal funds rate by 25 basis points to 4.00–4.25% in September 2025. Chair Powell called it a “measured recalibration,” emphasizing that while inflation progress continues, the Fed’s next moves will depend on incoming data, not a fixed timeline.

The effects are already visible. The 10-Year Treasury briefly dipped below 4% in mid-October—the lowest point since early 2024—easing borrowing costs and improving investor sentiment across real estate sectors.

Inflation remains on a downward path:

While these shifts haven’t triggered a rush of new deals yet, they’re setting the tone for what’s likely to be a steadier, more active investment environment heading into 2026.

According to CoStar’s U.S. Retail Capital Markets Report (National, Oct 25, 2025), the retail investment market has found a floor after two years of recalibration:🏗️ The Pillars

In short: fundamentals are steady. Demand softened slightly in early 2025 due to national retailer closures, but the lack of new construction and limited available space have prevented any meaningful erosion in property values.

Cap rates are expected to hold near 7.0–7.2% on average, with high-credit single-tenant assets trading below 6% and most grocery-anchored or multi-tenant strips in the mid-6s to low-7s.

If the 10-Year Treasury stays near 4%, some compression could occur in early 2026, especially for stabilized centers with long-term leases.

Investment volume is trending toward $70–75 billion by year-end, marking a clear rebound from 2023 lows. REITs and private buyers are re-entering the market with more confidence, supported by improving financing visibility.

CoStar data shows rent growth of 1.8% year-over-year, down from 3–4% in the pandemic rebound years.

Most leasing activity is concentrated in service-based tenants—QSR, medical, fitness, discount, and automotive—while soft goods remain cautious.

With starts and space under construction trending lower, the new-supply pipeline remains tight. This is critical: less than 1% of total retail inventory is currently under construction, helping keep fundamentals stable despite slower demand.

As we close out 2025, the market is steady, not overheated—a rare sweet spot for retail investors.

Rates are easing, consumer demand is holding, and new construction remains limited. The first movers into 2026 will be those who’ve already stress-tested their portfolios and prepared to act.

If you want a clearer understanding of where your strip center stands today — or what opportunities you might be missing — feel free to reach out.

I’d be more than happy to walk through it with you.

Thanks for reading. You’re always welcome to reach out with any questions or anything you need to better understand your investment. I’m here to help you make well-informed decisions with confidence.

— Ray Kang CCIM

Strip Center Investment Sales & Advisory