Not Dead, Just Different: How to Finance Retail in 2025

Retail has taken a beating in the headlines for the past decade. With the rise of e-commerce, shifting consumer behaviors, and changing tenant expectations, it’s easy to assume the asset class is on its way out.

But retail isn’t dead. It’s just different. This guide, part of our longer series on financing any kind of CRE asset, goes deeper into how retail loans work today.

Anyway, today’s lending reflects that "different" nuance. For brokers, understanding the divide between financeable and unfinanceable retail is critical to getting deals across the finish line.

What Counts as Retail?

Retail properties are designed for selling goods and services to consumers. That covers a huge range — from large malls and power centers to drive-thru restaurants and single-tenant pharmacies.

The leasing structure varies widely. Some retail properties are triple-net (NNN), meaning the tenant covers taxes, insurance, and maintenance. Others operate on gross or modified-gross leases, particularly in multi-tenant formats. Understanding how rent flows and expenses are structured is essential for lenders.

Key Subtypes and Their Lender Appeal

Grocery-Anchored and Neighborhood Centers

Centers anchored by national grocery chains are often considered the gold standard in multi-tenant retail. These properties draw consistent foot traffic and tend to house necessity-based tenants.

Lenders favor these centers when the anchor has strong credit and a long-term lease. Expect better terms and higher leverage if the rent roll is stable.

Power Centers and Malls

Power centers are big-box-focused centers with tenants like Best Buy, Target, or Home Depot. While still viable, their fortunes vary based on location, co-tenancy strength, and market saturation.

Malls, especially traditional enclosed formats, remain challenging. Even stabilized properties face uphill battles with lender perception, especially outside major metro areas.

Strip Malls and Unanchored Retail

Small, local-serving centers without a strong anchor are a mixed bag. Tenant rollover risk, credit concerns, and exposure to economic downturns make these less attractive to institutional lenders.

These can still get financed, particularly by banks or local credit unions, but expect tighter leverage and recourse requirements.

Single-Tenant NNN (STNL)

These are often the easiest retail properties to finance — assuming the tenant has strong credit. Think of Walgreens, Chase Bank, or national QSRs (Quick-Service Restaurants).

Long-term leases (10 to 20 years), investment-grade tenants, and low landlord obligations make these "bond-like" assets. Life companies, banks, and even private lenders are all active here.

Restaurant and QSR

Restaurants — especially drive-thrus — have been standout performers post-COVID. Fast food, coffee, and casual dining chains with strong financials are seeing significant lender interest.

Credit still matters. Independent or new-concept restaurants can be harder to finance, particularly in tertiary markets.

Retail Land

Raw or pre-development retail land is much more speculative. Expect short-term debt from banks or debt funds, and only if entitlements are in place and sponsor strength is proven.

Medical and "Medtail"

Retail spaces with medical tenants — dental clinics, urgent care, physical therapy — are increasingly popular. These tenants are resistant to e-commerce disruption and tend to sign longer leases.

Many lenders now view "medtail" as a stable hybrid, especially in urban or suburban markets.

Capital Sources for Retail Properties

Banks and Credit Unions

Ideal for neighborhood centers, unanchored strips, and smaller deals. Expect recourse, moderate leverage, and shorter terms. Relationships matter.

CMBS

CMBS is still active in retail, particularly for stabilized assets with solid tenants. Fixed-rate, nonrecourse loans are possible — but prepayment can be rigid.

Life Companies

Mostly focused on top-tier STNL or anchored centers in major markets. Conservative leverage, but great pricing and long terms for the right deal.

Debt Funds

Play in value-add and transitional assets — think re-tenanting a struggling center. Flexible, fast, and expensive. Best used for repositioning strategies.

SBA Loans

Applicable for owner-occupied retail (e.g., a restaurant where the borrower is the operator). Good for startups, expansions, or acquisitions with a strong personal guarantee.

What Lenders Are Watching Closely

• Tenant Mix: Necessity retail wins. Nail salons, grocery stores, coffee shops — yes. Apparel and chain bookstores — riskier.
• Lease Structures: NNN leases shift risk off the landlord and are preferred. Gross leases require closer expense scrutiny.
• Vacancy and Co-Tenancy Risk: One tenant’s departure can trigger a domino effect. Lenders evaluate the rent roll holistically.
• Dark Tenants: A tenant paying rent but not operating is a red flag. It kills traffic and signals distress.

Positioning Retail to Win

Retail financing can be nuanced, but it's not impossible. The key is knowing what kind of retail you're dealing with — and what kind of lender it suits best. Strong anchors, long-term leases, and necessity-based tenants can still draw great terms.

But don’t force a square peg through a round hole. A tired mall in a soft market with weak tenants won’t attract institutional capital. Instead, explore community banks, creative repositioning, or value-add strategies.

The story matters. And the best brokers tell a clear one — with tenants, lease structures, and market dynamics that support the ask.