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With public equity valuations appearing increasingly stretched, advisors and investors are redoubling their efforts to find areas of value in the marketplace. In this environment, assets offering both consistent yield and backed by tangible value are gaining renewed attention. The essential retail asset class has emerged as one such opportunity, underpinned by fundamentals rooted in steady demand and intrinsic value.
A matter of public perception
In many respects, retail investing faces an uphill battle in public perception. Persistent reports of store closures and the demise of legacy enclosed mall retailers¹ sometimes typecast the industry in a negative light, even though the reality is more nuanced. Differences in consumer spending habits and traffic patterns between discretionary and essential retail mean not all retail assets are created equal.
With its profoundly more resilient demand profile, the essential retail segment offers a distinct counterweight to the mainstream messaging. Unlike discretionary retail, this sector is defined by grocery, food service, banking and pharmacy-anchored retail properties that maintain consistent shopping volumes, regardless of economic climate. And since these tenants are less reliant on discretionary spending, their sales and, by extension, the landlord’s income tend to be stable in most economic conditions. For investment portfolios, that means exposure to an asset class built on everyday needs, offering a steady income potential profile, lower volatility, and resilience through economic cycles.
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1 CBC/Radio Canada. (2025, March 7). Hudson’s Bay files for creditor protection, intends to restructure. CBC News https://www.cbc.ca/news/business/hudsons-bay-creditor-protection-1.7477926