A Resilient Investment

Retail strip centers in Mobile and Baldwin counties

by Pratt Thomas

Open-air retail centers continue to be one of the most resilient and high-performing commercial real estate segments in Mobile and Baldwin counties. These essential service retail properties are attracting investor interest both nationally and locally due to their recession-resistance, e-commerce insulation and solid long-term fundamentals.

Typically ranging between 5,000 to 40,000 square feet, strip centers are leased to small tenants in categories such as food service, healthcare, fitness, personal care and convenience retail. While they lack large anchor tenants, their value lies in flexibility, tenant diversity and the ability to serve the day-to-day needs of the community. Their ability to maintain relevance during economic downturns has earned them a reputation as a class of retail assets with durability and dependable performance.

Strong Fundamentals Drive Demand

In Mobile and Baldwin counties, the fundamentals that support retail success are well-established. Dense suburban neighborhoods, well-trafficked corridors, prominent hard-corner sites and steady population growth all contribute to an ideal environment for these properties. Areas like West Mobile, Daphne, Fairhope, Foley and Spanish Fort exemplify these market conditions.

Retail fundamentals such as visibility, accessibility, signage opportunities and a necessity-driven tenant mix play an especially critical role in these communities. These properties are durable and consistently perform well.

Recent leasing trends support this strength. According to CoStar Group, the national occupancy rates for retail space are 95.8%, while Mobile County falls in line at 95.2%. Baldwin County boasts an impressive 97.2%. Elevated occupancy rates have allowed landlords to drive rent growth year over year with a growth nationally of 1.7% annually, while Mobile posted a 2.3% growth rate, and Baldwin County a 2.8% rent growth. The forecast is for “asking rent” growth in Mobile County to remain stable through 2026, while the forecast through 2026 for rent growth in Baldwin County is to fall in line with Mobile County at around 2.3%.

Tenant Mix: The Key to Long-Term Performance

Across the region, successful centers often feature strong local and regional tenants. Urgent care clinics, dental offices, restaurants and fitness studios are just a few examples of essential businesses that generate steady foot traffic and reliable rent streams. Tenant selection is crucial – a balanced mix of medical, service and food providers enhances synergy and ensures the center remains a daily stop for nearby residents.

In today’s competitive leasing environment, landlords aim to cultivate a “neighborhood feel” from the outset. Centers are designed to integrate seamlessly into daily routines, whether for lunch, a workout or a quick errand. This essential retail strategy helps centers remain relevant through economic cycles and unexpected disruptions.

Scarcity Sustains Strength

Despite increasing investor appetite, quality strip centers remain scarce in Mobile and Baldwin counties. A national slowdown in new retail development over the past decade has created a supply shortage, particularly in attractive suburban submarkets.

As a result, properties in secondary markets in Mobile and Baldwin counties are drawing increased buyer attention. Limited inventory and persistent demand are keeping valuations high, even for Class B or C centers. Many investors are waiting on the sidelines for pricing adjustments or distressed opportunities to emerge.

Those who are active in the market understand that identifying value requires strong local relationships and a nuanced understanding of what drives performance in specific communities.

In Mobile County over the trailing 12 months, 115 total retail properties sold for a total of $87.3 million compared to the annual average for the county over the past five years at $125 million. The average price was $131 per square foot with an 8.1% cap rate. In Baldwin County over the trailing 12 months, 92 retail properties sold for a total of $162 million – well above the county’s five-year annual average of $85.6 million. The average price was $181 per square foot with an average cap rate of 7.6%. The national average for price per square foot and cap rates were $246 and 7.1%, respectively. Investors across the country find value in our market with its attractive cap rates and prices per square foot significantly below the national average.

The Local Edge

In Alabama’s Gulf Coast region, success often hinges on local market knowledge. Understanding traffic patterns, infrastructure investments and demographic trends provides a significant advantage. For instance, Highway 98 or Highway 181 on the Eastern Shore and Highway 59 in Foley have become prominent retail corridors due to rising population and traffic volumes. Similarly, Mobile’s Airport Boulevard and Schillinger Road continue to be prime retail locations with their combination of residential density and commercial activity.Investors are increasingly drawn to these high-visibility corridors with strong fundamentals and growing neighborhoods, seeing them as prime opportunities for essential service retail.

Why Now?

There is growing consensus among investors that now may be the right time to target strip centers. High occupancy rates, consistent rent growth and a resilient tenant base make these properties especially attractive. Over the next 12 to 24 months, loan maturities are expected to bring additional assets to market, potentially unlocking buying opportunities for well-capitalized buyers.

However, selectivity remains important. Not all centers justify premium pricing, and investors are increasingly scrutinizing fundamentals before making acquisitions.

Futureproofing Through Services

Service-based retail has proven to be one of the most e-commerce￾resistant segments in the industry. Tenants such as salons, walk-in clinics, restaurants and fitness studios continue to draw frequent, repeat visits. These are experiences that cannot be replicated online, which helps drive foot traffic and build tenant retention.

Retail design and synergy are becoming more critical. Data shows that even modest increases in customer dwell time can significantly boost sales, emphasizing the importance of thoughtful tenant placement and shared amenities.

Looking Ahead

Retail centers in Mobile and Baldwin counties offer consistent, reliable performance in a shifting commercial landscape. They may not garner the headlines reserved for large industrials that have made the headlines in recent years, but they provide something more enduring: day-to-day relevance and consistent demand.

From the revitalized retail corridors of West Mobile to the growing commercial hubs of Baldwin County, the Gulf Coast continues to be a promising region for unanchored retail investment. As long as investors can find quality assets, the outlook for this product type remains strong.

Reference

[1] “Essential Retail,” Shopping Center Business, March 2025.

Pratt Thomas is the president of Merrill P Thomas Co., Inc. and is a distinguished professional with more than 20 years’ experience in the real estate, banking and construction industries. His career is marked by a proactive approach and a results-driven mindset, coupled with extensive expertise in development, brokerage services and property management.