Jeff Enck on Southeast Shopping Center Trends

In this episode of the Matthews™ Podcast, host Matthew Wallace continues the publication takeover series with Part 3 of the National Shopping Center Overview, breaking down the Southeast with Matthews™ Senior Vice President Jeff Enck.

With 25+ years of retail investment sales experience and hundreds of transactions closed across the Southeast, Enck shares why strip centers have moved from underrated to one of the most competitive retail investment categories in the country, and what that means for both private and institutional capital.

The Role of Strip Centers as a Primary Asset Class

Traditionally, retail real estate was often viewed through the lens of grocery-anchored or power cents. However, Enck notes that over the last decade, and specifically the last two to three years, unanchored strip centers have shifted their strategies to exit grocery-anchored and power centers in favor of strips.

Industrial Adoption: Major groups, including the first publicly traded REIT solely focused on strip centers (Curbline), have shifted their strategies to exit grocery-anchored and power centers in favor of strips.
The “Apartmentization” of Retail: Investors are increasingly treating strip centers like “retail multifamily”. Because the bays are typically uniform (1,500 to 2,500 square feet), owners expect regular tenant turnover as an opportunity to reset and increase rents.
Operational Efficiency: Re-tenanting smaller bays is more capital-efficient than filling large big-box spaces, often requiring less tenant improvement (TI) allowance.

Essential Service Retail (ESR) and the Amazon Impact

The narrative of the “retail apocalypse” has shifted as investors recognize the durability of “essential service retail”.

Recession and Internet Proofing: Success in the space is driven by tenants that cannot be easily replaced by e-commerce, such as urgent care, hair salons, dentists, and local restaurants.
The Amazon Synergy: Ironically, the rise of Amazon has helped strip centeres by creating a need for shipping hubs. Many centers now feature UPS or Pack Mail stores to handle the heavy volume of consumer returns.
The Human Factor: COVID-19 revealed that local “mom and pop” tenants are often more resilient than national credit tenants because their personal livelihoods are tied to the business, making them more willing to collaborate with landlords during crises.

Investment Dynamics of the Southeast

Enck highlights the Southeast as a particularly attractive region due to its fundamental economic drivers.

Growth Drivers: Tax-friendly states, job importation, and low cost of living have led to a massive influx of population, which in turn fuels the need for retail support.
Market Concentration: Major metros like Charlotte, Tampa, Atlanta, Orlando, and Nashville are all performing solidly.
Yield Opportunities: While core markets see heavily compressed cap rates, investors are increasingly looking toward secondary markets like Savannah, Knoxville, and Greenville to find better yield

The Future of the Asset Class

Early Innings of Institutionalization: The strip center market remains highly fragmented. Enck estimates that only about 1.5% to 2% of the approximately 68,000 unanchored centers nationwide are currently institutionally owned.
Rent Growth Strategy: The primary attraction for large groups is “mark to market” opportunities—buying seasoned properties (10–30 years old) and raising below-market rents.
Supply Constraints: New construction of traditional strips is limited due to high construction costs. Most new development is focused on small 2–4 tenant out-parcels (e.g., Chipotle and Starbucks) where rents are already at their peak, limiting future growth potential.

Key Takeaways for CRE Professionals

Stick to a Specialization: Enck advises young brokers to choose a property type and geographic focus and stay with it, rather than jumping between asset classes based on what is currently popular.
Understand Risk from the Buyer’s Perspective: Learning how buyers evaluate risk, a lesson Enck learned from early struggles with difficult listings, is essential for long-term success
Value of Professional Representation: Because 80% of strip center owners only own one or two properties, there is a significant opportunity for brokers to provide professional guidance to private clients.