Necessity Retail & Triple-Net (NNN)

Editor’s Note: This is a 2026 update from a series post­ed in 2022

Introduction

Retail real estate has under­gone tremen­dous trans­for­ma­tion over the past decade. While many investors con­tin­ue to asso­ciate retail with enclosed malls and depart­ment stores, today’s insti­tu­tion­al investors and DST spon­sors are increas­ing­ly focused on a more resilient seg­ment of the mar­ket: neces­si­ty-based retail and triple-net leased prop­er­ties.

“Retail isn’t disappearing—it is evolv­ing,” says Al DiNi­co­la. “The strongest retail assets today tend to be those pro­vid­ing goods and ser­vices con­sumers need on a reg­u­lar basis rather than dis­cre­tionary pur­chas­es.”

For cash investors and 1031 exchange investors, retail con­tin­ues to offer attrac­tive oppor­tu­ni­ties for income gen­er­a­tion, diver­si­fi­ca­tion, and pas­sive own­er­ship through Delaware Statu­to­ry Trust struc­tures.

Understanding Today’s Retail Landscape

Retail encom­pass­es a broad spec­trum of prop­er­ty types, includ­ing:

• Neigh­bor­hood shop­ping cen­ters
• Gro­cery-anchored cen­ters
• Pow­er cen­ters
• Lifestyle cen­ters
• Drug­store loca­tions
• Quick-ser­vice restau­rants
• Auto­mo­tive ser­vice cen­ters
• Stand­alone retail prop­er­ties
• Essen­tial ser­vice retail

The mod­ern retail envi­ron­ment has become increas­ing­ly focused on con­ve­nience, acces­si­bil­i­ty, and neces­si­ty-dri­ven con­sumer spend­ing.

“The ques­tion investors should ask is not whether retail is viable,” notes DiNi­co­la. “The ques­tion is which retail for­mats are best posi­tioned for long-term suc­cess.”

The Rise of Necessity-Based Retail

One of the most sig­nif­i­cant shifts in retail invest­ing has been the move­ment toward neces­si­ty retail.

Neces­si­ty retail ten­ants gen­er­al­ly pro­vide prod­ucts or ser­vices con­sumers pur­chase regard­less of eco­nom­ic con­di­tions.

Exam­ples may include:

• Gro­cery stores
• Phar­ma­cies
• Med­ical clin­ics
• Auto parts stores
• Dis­count retail­ers
• Home improve­ment stores
• Con­ve­nience stores
• Farm and ranch sup­ply stores

“Peo­ple con­tin­ue buy­ing gro­ceries, fill­ing pre­scrip­tions, main­tain­ing vehi­cles, and vis­it­ing health­care providers dur­ing both strong and weak eco­nom­ic peri­ods,” explains DiNi­co­la.

This con­sis­ten­cy has made neces­si­ty retail increas­ing­ly attrac­tive to insti­tu­tion­al investors.

Triple-Net (NNN) Leases: A Core Retail Strategy

Many retail DST offer­ings uti­lize Triple-Net (NNN) lease struc­tures. Triple-Net leas­ing remains one of the most pop­u­lar own­er­ship struc­tures with­in the retail sec­tor.

Under a tra­di­tion­al NNN lease, the ten­ant is gen­er­al­ly respon­si­ble for:

• Prop­er­ty tax­es
• Build­ing insur­ance
• Main­te­nance expens­es

“The Triple-Net struc­ture shifts many oper­a­tional respon­si­bil­i­ties to the ten­ant, which can cre­ate a more pre­dictable own­er­ship expe­ri­ence for investors,” says DiNi­co­la.

While lease struc­tures vary and should always be reviewed care­ful­ly with­in the Pri­vate Place­ment Mem­o­ran­dum (PPM), NNN leas­es remain a cor­ner­stone of many retail DST offer­ings.

Why Investors Like Triple-Net Properties

Sev­er­al char­ac­ter­is­tics make NNN prop­er­ties attrac­tive.

Long-Term Leases

Many NNN leas­es may extend:

• 10 years
• 15 years
• 20 years or longer

Long lease dura­tions can pro­vide greater vis­i­bil­i­ty into future income streams.

Creditworthy Tenants

Many DST retail offer­ings fea­ture nation­al­ly rec­og­nized ten­ants.

Exam­ples often include:

• Gro­cery oper­a­tors
• Phar­ma­cy chains
• Auto­mo­tive retail­ers
• Home improve­ment com­pa­nies
• Health­care providers

“The qual­i­ty of the ten­ant is often just as impor­tant as the qual­i­ty of the real estate,” notes DiNi­co­la.

Limited Management Responsibilities

Triple-Net prop­er­ties gen­er­al­ly require less day-to-day involve­ment than many oth­er prop­er­ty types. This char­ac­ter­is­tic aligns well with the pas­sive nature of DST own­er­ship.

E‑Commerce Is Changing Retail, Not Eliminating It

One of the most com­mon con­cerns investors express involves e‑commerce.

The real­i­ty is more nuanced.

“E‑commerce has cer­tain­ly trans­formed retail, but it has not elim­i­nat­ed the need for phys­i­cal stores,” says DiNi­co­la.

In many cas­es, phys­i­cal and dig­i­tal retail now work togeth­er.

Exam­ples include:

• Buy online, pick up in store (BOPIS)
• Same-day ful­fill­ment
• Prod­uct returns
• Inven­to­ry dis­tri­b­u­tion
• Cus­tomer ser­vice sup­port

Many retail­ers now uti­lize phys­i­cal stores as mini-dis­tri­b­u­tion cen­ters sup­port­ing online sales.

The Retail Categories Most Resistant to E‑Commerce

Cer­tain retail cat­e­gories con­tin­ue demon­strat­ing resilience because their ser­vices are dif­fi­cult or impos­si­ble to dig­i­tize.

These include:

Service-Based Retail

• Hair salons
• Nail salons
• Fit­ness cen­ters
• Med­ical clin­ics
• Vet­eri­nary prac­tices

Food and Beverage

• Restau­rants
• Cof­fee shops
• Ice cream shops
• Spe­cial­ty food con­cepts

Automotive Services

• Tire cen­ters
• Oil change facil­i­ties
• Auto repair busi­ness­es

Healthcare Retail

• Phar­ma­cies
• Urgent care facil­i­ties
• Dial­y­sis cen­ters

“The more per­son­al inter­ac­tion required, the less vul­ner­a­ble the ten­ant typ­i­cal­ly is to online com­pe­ti­tion,” explains DiNi­co­la.

Grocery-Anchored Retail Continues to Perform

One of the strongest seg­ments with­in retail remains gro­cery-anchored shop­ping cen­ters. Con­sumers con­tin­ue mak­ing fre­quent gro­cery vis­its regard­less of eco­nom­ic con­di­tions.

Gro­cery anchors may dri­ve traf­fic to:

• Restau­rants
• Ser­vice providers
• Phar­ma­cies
• Spe­cial­ty retail­ers

“Traf­fic gen­er­a­tion remains one of the key advan­tages of gro­cery-anchored cen­ters,” says DiNi­co­la.

The dai­ly neces­si­ty of gro­cery shop­ping cre­ates recur­ring cus­tomer vis­its that ben­e­fit sur­round­ing ten­ants.

Tenant Mix Matters

Suc­cess­ful retail cen­ters often com­bine mul­ti­ple ten­ant cat­e­gories.

A diver­si­fied ten­ant ros­ter may include:

• Gro­cery stores
• Med­ical ten­ants
• Restau­rants
• Per­son­al ser­vice providers
• Finan­cial insti­tu­tions
• Dis­count retail­ers

The goal is cre­at­ing a des­ti­na­tion that attracts repeat vis­its through­out the week. “The best retail cen­ters become part of the community’s dai­ly rou­tine,” notes DiNi­co­la.

Geographic Diversification in DST Retail Offerings

One advan­tage of many DST retail offer­ings is diver­si­fi­ca­tion.

Rather than own­ing one retail loca­tion, investors may gain expo­sure to mul­ti­ple prop­er­ties across sev­er­al states.

A typ­i­cal retail port­fo­lio DST may include:

• Gro­cery stores
• Phar­ma­cies
• Auto parts loca­tions
• Health­care facil­i­ties
• Dis­count retail­ers

locat­ed through­out dif­fer­ent mar­kets.

“Geo­graph­ic diver­si­fi­ca­tion can help reduce expo­sure to local­ized eco­nom­ic chal­lenges,” says DiNi­co­la.

Retail Trends Shaping 2026

Sev­er­al trends con­tin­ue influ­enc­ing retail invest­ment deci­sions.

Sun Belt Population Growth

Pop­u­la­tion growth through­out:

• Flori­da
• Texas
• Ten­nessee
• North Car­oli­na
• South Car­oli­na
• Ari­zona

con­tin­ues sup­port­ing retail demand.

Omnichannel Retailing

Retail­ers increas­ing­ly inte­grate:

• Online sales
• Phys­i­cal loca­tions
• Deliv­ery ser­vices
• Mobile appli­ca­tions

into a uni­fied cus­tomer expe­ri­ence.

Healthcare Retail Expansion

Med­ical and well­ness-ori­ent­ed retail ten­ants con­tin­ue expand­ing.

Discount Retail Growth

Val­ue-ori­ent­ed retail­ers remain attrac­tive as con­sumers seek con­ve­nience and afford­abil­i­ty.

Convenience-Based Shopping

Con­sumers increas­ing­ly pri­or­i­tize speed and con­ve­nience over large des­ti­na­tion shop­ping trips.

What DST Sponsors Look For

When eval­u­at­ing retail oppor­tu­ni­ties, spon­sors fre­quent­ly ana­lyze:

Tenant Credit Quality

Can the ten­ant con­tin­ue meet­ing lease oblig­a­tions over the long term?

Lease Structure

Are there rent esca­la­tions, renew­al options, and favor­able lease terms?

Property Location

Does the loca­tion serve grow­ing pop­u­la­tions and strong demo­graph­ics?

Market Fundamentals

What are the area’s employ­ment, income, and pop­u­la­tion growth trends?

Real Estate Quality

Is the prop­er­ty posi­tioned to remain com­pet­i­tive through­out the invest­ment hold peri­od?

Risks Investors Should Consider

Retail invest­ments are not with­out risk.

Poten­tial con­sid­er­a­tions include:

• Ten­ant bank­rupt­cies
• Lease rollover risk
• Chang­ing con­sumer behav­ior
• New com­pet­i­tive devel­op­ments
• Eco­nom­ic slow­downs

Investors should review all risks dis­closed with­in the PPM before invest­ing.

Why Retail Remains Relevant

Despite the growth of e‑commerce, retail remains a crit­i­cal com­po­nent of the econ­o­my.

Con­sumers still require:

• Gro­ceries
• Health­care
• Auto­mo­tive ser­vices
• Restau­rants
• Essen­tial house­hold goods

“As long as con­sumers need goods and ser­vices, well-locat­ed retail prop­er­ties will con­tin­ue to play an impor­tant role in the econ­o­my,” says DiNi­co­la.

The chal­lenge is iden­ti­fy­ing the right retail cat­e­gories and the right ten­ants.

Conclusion

Retail real estate has evolved sig­nif­i­cant­ly over the past decade, with neces­si­ty-based retail and Triple-Net leased prop­er­ties emerg­ing as some of the most attrac­tive seg­ments for insti­tu­tion­al and DST investors.

Sup­port­ed by strong ten­ant demand, long-term lease struc­tures, pop­u­la­tion growth, and con­sumer neces­si­ty, many retail assets con­tin­ue to offer com­pelling oppor­tu­ni­ties for pas­sive investors.

“Today’s retail sto­ry is real­ly about neces­si­ty, con­ve­nience, and ser­vice,” con­cludes DiNi­co­la. “Investors who focus on those fun­da­men­tals often find retail remains a valu­able com­po­nent of a diver­si­fied real estate port­fo­lio.”

Investors should remem­ber that every asset class has unique risks and oppor­tu­ni­ties. Under­stand­ing how each asset type fits with­in an over­all invest­ment strat­e­gy remains one of the most impor­tant steps in eval­u­at­ing any Delaware Statu­to­ry Trust offer­ing.