The CBOE Volatility Index (VIX)—a widely watched indicator of near-term market stress—recently spiked above 50 (Yahoo! Finance). This surge reflects a sharp rise in investor uncertainty and expectations of continued turbulence in the public markets.
With headlines dominated by tariffs, inflation, and geopolitical risk, many investors are asking the same question: “Where can I find stability?”
For some, the answer is necessity-based real estate.
What Is Necessity-Based CRE?
Necessity-based commercial real estate (CRE) refers to retail centers anchored by essential service providers—grocery stores, pharmacies, urgent care clinics, banks, etc. These are the businesses people rely on whether the market is up, down, or sideways.
These centers are often supported by long-term lease agreements with tenants that provide day-to-day necessities. This structure may create a different risk profile compared to traditional public equities.
How It Differs from the Public Market
Public markets can fluctuate by double digits in a matter of days. By contrast, necessity-based CRE typically sees more stability thanks to:
- Multi-year lease agreements (often 5–15 years)
- Rent escalations built into contracts
- Tenants that are legally obligated to pay rent regardless of market sentiment
- Properties located in stable, high-traffic corridors
- The inflexible demand of the products and services they offer
This structure doesn’t eliminate risk—but it may provide a level of predictability that a highly volatile market cannot.
Why Some Investors Are Making the Shift
Diversification
Necessity-based CRE has historically shown low correlation to public markets, making it a potential diversification tool in uncertain times.
Real Assets with Income Potential
These properties are typically leased to essential service tenants. While returns are never guaranteed, this structure may help investors better estimate future income.
Stability Through Essentials
Demand for groceries, pharmaceuticals, and daily services tends to remain steady across economic cycles. That doesn’t make necessity-based CRE immune to fluctuating markets —but it may offer more consistency than discretionary retail or high-volatility assets.
Disclosure: All investments involve risk, including potential loss of principal. Past performance is not indicative of future results. This content is for informational purposes only and does not constitute investment advice.
Final Thought: Rebuilding Confidence Means Rethinking Strategy
The 2025 market has served as a wake-up call for many investors. It’s a reminder that when the market swings, every asset isn’t affected equally.
For those seeking a different path—one grounded in long-term leases, tangible assets, and essential service demand—necessity-based commercial real estate may be worth exploring.
If you’re an accredited investor looking to diversify, now may be the right time to review what’s currently available.
Disclaimer: An investment in commercial real estate is speculative and subject to risk, including the risk that all of your investment may be lost. Securities are only available to verified accredited investors who can bear the loss of their investment. FNRP and its affiliates do not provide investment, financial, tax, legal or accounting advice. The contents of this e-mail have been prepared for informational purposes only, and are not intended to provide, and should not be relied on for, investment, financial, tax, legal or accounting advice. You should consult your own investment, financial, tax, legal and accounting advisors before engaging in any transaction.
