Navigating a Rapidly Changing Retail Industry
Takeaways from the ICSC Las Vegas Convention
Over 20,000 real estate investors, developers, property managers, retailers and brokers convened in Las Vegas last month for the annual ICSC convention. In the midst of a volatile market, attendees sought answers on how to navigate current challenges impacting the retail industry. Below were three of the biggest themes to emerge.
Retail resiliency amid market headwinds
Just a few years ago, the outlook for the retail industry was grim. Consumers weren’t shopping due to the pandemic, brick-and-mortar stores were closing and many large retailers were filing for bankruptcy. However, the market surprisingly bounced back post-covid as consumers returned to stores with a desire to spend.
As the real estate industry as a whole now contends with new challenges including higher interest rates and economic uncertainty, the silver lining is that retail has been somewhat less impacted than other asset classes. Office continues to face return-to-work challenges and industrial is contending with supply chain bottlenecks and overall supply shortages. While retail has not been entirely insulated, the fundamentals have remained quite sound – leasing remains strong, occupancy is high and companies are continuing to announce new store openings. The consensus at ICSC was that there are certainly challenges ahead, but that the retail industry is well positioned to weather the storm and come out in a position of strength.
Trend toward mixed-use retail
One of the biggest challenges in today’s retail environment is adapting to the growing and changing needs of the everyday consumer. As a result, landlords, retail owners and developers are increasingly exploring mixed-use developments – which blend multiple uses such as retail, residential and entertainment. For instance, a landlord may decide to redevelop an existing retail center by incorporating entertainment facilities, residential apartments and hotel amenities that attract consumers while also helping drive sales and boost profits. Landlords are also embracing a more experiential approach to retail centers by incorporating movie theaters, fitness centers, spas and other lifestyle attractions. Particularly now when ground-up retail development is not the most attractive given the current market, converting existing retail centers into mixed-use sites is a unique way for landlords to maximize value and grab consumer attention.
Sale-leasebacks as a solution for rising development costs
Rising interest rates continue to impact retail development. Developers’ capital costs have increased drastically, and as a result they are demanding higher asking rents from retailers. This is forcing more retailers to turn toward in-house development, which means the development costs are held on the balance sheet of the company. To offset these costs, retailers are exploring sale-leasebacks – where a company sells its real estate to an investor for cash and simultaneously enters into a long-term lease. This enables the retailer to receive a significant cash infusion while maintaining full operational control of the property.
Developers can also take advantage of the sale-leaseback model. If they’re developing a building in which a tenant has already been secured, developers can work with an investor on a forward commitment in which the investor funds construction costs and acquires the building upon completion, or the investor purchases the building once complete. This enables the developer to recoup costs while still collecting a development fee.
With an interest rate decrease not likely for 2023, sale-leasebacks are expected to continue growing in popularity for retailers looking to expand their footprints and developers, providing opportunity for investors that specialize in these types of transactions (like W. P. Carey!).
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MIPIM 2026: Where Capital, Conviction and Opportunity Converge
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Forging Long-term Partnerships Through Tenant-centered Real Estate Solutions
At W. P. Carey, we view real estate as a long‑term partnership — not a one‑time transaction. We stay closely connected with our tenants, aligning our capital and real estate expertise with the evolving needs of their businesses. That philosophy is embedded in Carey Tenant Solutions, our platform designed to support tenant growth beyond the initial acquisition. Through follow‑on investments, we help tenants modernize, expand, redevelop, relocate and improve the energy efficiency of their facilities — allowing them to focus capital on what matters most: running and scaling their core business. Below is an overview of the core capabilities within Carey Tenant Solutions and how each can benefit existing and prospective tenants. Build-to-suits In a build‑to‑suit, W. P. Carey funds and manages the construction of a new facility — or the expansion of an existing one — tailored to the precise specifications of a prospective or existing tenant. Upon completion, the tenant enters into a long‑term net lease while retaining full operational control of the new or expanded facility. We offer two flexible approaches to build‑to‑suits: Build-to-suit financing: We provide construction capital while the tenant’s developer executes the project, either through traditional construction financing funded over time or via take‑out financing upon completion. Turnkey build-to-suit: We finance and manage the entire construction process, from site selection to final delivery. For tenants, the primary advantage of a build‑to‑suit is capital efficiency. Rather than tying up their capital in real estate, tenants can redeploy resources toward growth initiatives, innovation or strengthening operations — while still gaining a facility designed specifically for their needs. Learn how this approach helped support our tenant Cuisine Solutions’ growth. Redevelopments W. P. Carey offers comprehensive redevelopment capabilities, managing projects from initial design through delivery. Combining our internal development expertise and long‑standing relationships with leading architects, consultants and contractors, we assemble experienced teams capable of executing even the most complex redevelopment projects. Our redevelopment capabilities span: Repositionings, where we upgrade, modernize or expand an existing building while maintaining its core use. Redevelopments, which involve unlocking value of infill locations through adaptive reuse and ground up construction of state-of-the-art, primarily industrial, properties that meet the demands of modern occupiers. W. P. Carey’s turnkey redevelopment process is comprehensive and includes: Pre-construction planning and optimization Development feasibility and due diligence Zoning and entitlement approvals Design and permitting Budgeting and scheduling Construction management Creative lease structures Sustainable development Overall efficiency Our proactive approach allows us to work directly with incoming tenants to shape a property around their exact operational requirements, while enhancing the quality of our portfolio by retaining the best positioned assets in the highest barrier-to-entry locations. Learn more about our carbon-neutral redevelopment of a Class-A warehouse for a global IT services company. Energy Solutions Through Carey Tenant Solutions, we also help tenants reduce operating costs and advance their sustainability goals by designing, funding and implementing renewable power and energy efficiency projects directly at their facilities. We believe that improving the quality and sustainability of our assets delivers tangible benefits across our portfolio — increasing renewal probabilities, strengthening tenant relationships and enhancing long‑term asset value – all while helping our tenants reduce their carbon footprint. Our energy solutions include: On‑site renewables, including CareySolar® Efficiency retrofits, such as LED lighting upgrades Smart building technologies, including IoT‑enabled metering Green infrastructure, such as EV charging stations and battery storage Carbon‑neutral construction By integrating these solutions into our long‑term ownership strategy, we help tenants operate more efficiently today while building assets that are better positioned for the future. Read how we collaborated with our tenant, a healthcare products distributor, to fund a rooftop solar installation. A Platform Built on Partnership Collaboration with our tenants — and support beyond the initial transaction — has always been core to how we operate at W. P. Carey. With Carey Tenant Solutions, we have formalized and unified those capabilities, bringing decades of experience together under a single platform to deliver one of the most comprehensive tenant service offerings in the net lease industry. Interested in exploring Carey Tenant Solutions? Get in touch today.
2026 Net Lease Outlook
After several years marked by inflation, interest rate uncertainty and selective buyer activity, the U.S. net lease market enters 2026 with more clarity – and more momentum. As pricing resets work through the real estate sector and investors gain confidence in the direction of capital markets, we expect an increase in transaction volume in the year ahead. Below are three predictions set to shape the U.S. net lease landscape in 2026. Transaction Volume Will Rebound as Pricing Stabilizes The reset in valuations throughout 2024 and 2025 has narrowed bid‑ask spreads and revived buyer activity. As the sector digested Fed policy shifts and debt markets steadied, transaction activity began increasing meaningfully – particularly in industrial and logistics. As a result, we expect a measurable uptick in volume in 2026 as investors lean into improved cost‑of‑capital visibility. Colliers forecasts that U.S. CRE transaction volume will grow 15–20% in 2026. Industrial Will Continue to Dominate Industrial demand is positioned to remain strong in 2026. As trade‑policy uncertainty eased in late 2025, many companies who had paused expansion or relocation decisions finally moved forward, bringing a wave of leasing activity that is carrying into the new year. E‑commerce also continues to be a powerful structural driver, underpinning robust leasing demand as retailers and logistics operators expand fulfillment capacity to meet consumer needs. At the same time, development pipelines have slowed, allowing the market to work through new supply. As a result, vacancy is expected to stabilize in 2026, reinforcing a fundamentally balanced environment for investors and occupiers alike. Rising M&A Activity Will Drive New Sale‑Leaseback Opportunities An anticipated rise in M&A activity will likely fuel an increase in sale‑leaseback opportunities in 2026. Private equity firms often use sale-leasebacks to reduce upfront equity requirements and enhance returns when acquiring a new business, especially in deals where real estate represents a meaningful share of the purchase price. On the post-acquisition side, sale-leasebacks can offer PE firms considerable financial flexibility, supporting reinvestment into the portfolio company’s business or even future follow-on acquisitions. Altogether, the anticipated surge in M&A is expected to expand the pipeline of high‑quality real estate coming to market, providing ample opportunity for sale-leaseback investors. Final Thoughts As 2026 unfolds, the U.S. net lease market is entering a period of renewed stability and opportunity. With transaction volumes rebounding, industrial demand holding firm and sale-leaseback activity accelerating alongside M&A trends, investors have multiple avenues to deploy capital strategically. Staying attuned to these drivers will be essential for navigating the year ahead.