The Consumer Spending Split: Why Income Polarization Favors Grocery-Anchored Retail

American consumers are not all behaving the same way anymore. The past few years have created a stark divide in spending patterns across income levels, and this polarization is reshaping retail fundamentally. The wealthy continue to spend on premium goods, travel, and experiences, while middle and lower-income households are pulling back on discretionary purchases and gravating toward value and necessity retail. This isn't a temporary recession or adjustment—it's a structural shift that's here to stay.

For investors in retail real estate, this divergence presents both a challenge and an extraordinary opportunity. And it's the grocery-anchored centers that stand to benefit most from this bifurcation. Here's why.

The Two-Speed Consumer Economy

The data is unambiguous. Higher-income households—those earning above $150,000 annually—have largely maintained their spending patterns and, in some segments, increased discretionary outlays. Luxury retail, fine dining, travel, and premium goods are seeing robust traffic and strong sales. These consumers have benefited from stock market gains, stable employment, and the flexibility to weather economic uncertainty.

Meanwhile, households in the middle and lower-income brackets are responding to structural headwinds: rent pressures, elevated food costs, student debt, and lingering concerns about economic stability. These consumers are making deliberate choices to cut back on non-essentials. They're shopping at discount retailers, choosing store brands over name brands, and deferring major purchases. The luxury goods they once aspirationally bought are now out of reach.

CBRE's recent analysis of U.S. retail trends underscores this reality, noting that "affordability challenges of less-affluent consumers" are driving divergent retail performance. The implication is critical: this isn't a cyclical dip. It's a structural shift in how different income cohorts allocate their spending power. Unlike past recessions where consumer weakness was broad-based, today's spending patterns are increasingly bifurcated by income level.

The traditional middle market of "aspirational" retail—where consumers once traded up to premium brands—is hollowing out. This is a fundamental change in retail dynamics that most investors are still underpricing in their valuations.

Why Necessity Retail Wins in Both Scenarios

Here's the elegant insight that underpins the grocery-anchored thesis: everybody buys groceries, regardless of income level. The wealthy buy organic, artisanal, and premium products. Middle and lower-income consumers buy value brands and essentials. But both cohorts are spending money in the grocery store every week.

Grocery spending as a share of household income has remained remarkably stable across economic cycles—hovering between 10 and 12 percent of after-tax income. This stability is not accident; it's biology. People need to eat. They need staples. This consistency is precisely what makes grocery-anchored shopping centers so resilient.

When the economy is strong, grocery traffic remains steady and reliable. When economic headwinds intensify, grocery traffic actually increases as consumers redirect their budgets toward essentials. Grocery is a defensive anchor that doesn't suffer the boom-and-bust cycles of discretionary retail. Food spending continues regardless of the macroeconomic backdrop.

This stability extends to occupancy rates and rent growth. A grocery-anchored center maintains steady foot traffic, which means consistent visibility for co-tenants, which means lower vacancy risk and more predictable rent collections. This is why we advocate so strongly for grocery-anchored retail as the foundation of a resilient portfolio. For more on this dynamic, see our analysis on why grocery-anchored retail outperforms.

The Co-Tenancy Effect

The grocery anchor doesn't just perform well in isolation—it creates a halo effect that elevates the entire shopping center. Shoppers come for groceries and discover services and goods they weren't specifically shopping for. This is the co-tenancy dynamic, and it's become increasingly important.

Service tenants—dental practices, hair salons, fitness studios, pet care facilities—are thriving in grocery-anchored centers because these tenants occupy the same necessity category as groceries. People need healthcare, wellness, and basic services just as they need food. Unlike discretionary retailers, service tenants draw consistent traffic from both affluent and value-conscious shoppers.

Grocers are increasingly aware of this dynamic and actively seeking adjacency to these service uses. The data shows that grocer anchor leases now often include language around compatible co-tenancies and preferred tenant mixes. Grocers understand that a healthy anchor tenant mix—focused on complementary necessities—increases dwell time, boosts basket sizes, and creates a more defensible business model for the entire property.

This co-tenancy effect is why grocery-anchored centers with strong service components are winning market share from traditional strip centers and mall-based retailers. For deeper insight, read our exploration of the grocery anchor effect on foot traffic.

How Income Demographics Shape Investment Strategy

CBRE's guidance to developers and investors is clear: the best rent growth opportunities are in centers catering to higher-income households. Premium grocers in affluent suburbs command higher rents, attract upscale co-tenants, and offer stronger cash-on-cash returns.

But here's where conventional wisdom misses the opportunity: value-oriented centers in middle-income neighborhoods also perform extraordinarily well when they're anchored by the right grocer. A Trader Joe's, Whole Foods, or upscale natural market in an affluent area will command premium rents, but a well-operated Aldi, Lidl, or WinCo store in a working-class neighborhood delivers just as strong occupancy, tenant retention, and foot traffic stability.

The key is alignment: match your tenant quality and merchandise mix to the trade area demographics. Don't force Whole Foods into a workforce neighborhood where customers shop on a tight budget. And don't assume that discount grocers in affluent areas will thrive. The magic happens when the anchor and co-tenants are calibrated to the neighborhood's income profile.

Centers serving affluent suburbs with premium grocers and upscale services (high-end salons, yoga studios, upscale casual dining) can command 15-20 percent higher rents than their value-oriented counterparts. But value-oriented centers with discount grocers and practical services (urgent care, haircuts, fitness) deliver stability and occupancy rates that are essentially equivalent. Either way, the grocery anchor provides the critical income floor that makes the entire property defensible.

For more on how to evaluate these dynamics, see our detailed analysis of grocery anchor quality and performance variation.

What This Means for Investors

Consumer spending polarization is actually a gift to grocery-anchored retail investors. Here's why:

In affluent markets: Premium grocers paired with upscale services and experiences deliver strong rent growth, high occupancy, and resilient cash flows. Higher-income shoppers spend more on specialty items, prepared foods, and adjacent services. These properties command premium valuations, but they earn them.

In value-conscious markets: Discount grocers paired with essential services deliver exceptional occupancy stability and predictable cash flows. These properties may not command the rent premiums of luxury centers, but they deliver lower leverage, faster cash-on-cash returns, and remarkable resilience during downturns.

The critical difference: Discretionary-heavy retail in middle-market centers without a necessity anchor is the real risk today. A shopping center dominated by apparel, restaurants, and discretionary services in a middle-income area is exposed to exactly the spending pullback we're seeing. These properties face rising vacancy, rent pressure, and value deterioration.

Grocery-anchored centers benefit from both sides of the spending split. Whether your trade area is affluent or value-conscious, the grocery anchor provides the stable income floor. Everything else is upside.

Looking Ahead

Consumer polarization is expected to deepen, not reverse. Income inequality is structural, and spending patterns follow. This suggests that the bifurcation we're seeing today will only intensify in the coming years.

Meanwhile, retail supply fundamentals are shifting dramatically in our favor. New retail construction has plummeted to historic lows—down 37 percent in 2026 according to construction data—as builders struggle with construction costs and financing constraints. This supply scarcity is a tailwind for existing, well-located properties, especially those with irreplaceable grocery anchors.

For more on this opportunity, see our detailed analysis on how historic retail construction lows create investor opportunity.

The Bottom Line

Consumer spending polarization doesn't weaken the grocery-anchored thesis—it strengthens it immensely. The growing divide between affluent and value-conscious shoppers creates a clear competitive advantage for properties built around necessity retail anchors. These centers thrive in both strong and weak environments, deliver consistent cash flows, and offer a defensive shelter against economic volatility.

If you're building a portfolio of retail real estate investments, the evidence is overwhelming: grocery-anchored, necessity-focused retail is where the opportunity lies. Download our complete guide to learn more about how to identify, evaluate, and invest in these resilient assets.