Getty Realty's Strategic Expansion into Houston's Convenience Retail Sector: Balancing Asset Diversification and Yield in a High-Growth Niche

In a calculated move to diversify its commercial real estate portfolio, Getty Realty Corp. has allocated $100 million to acquire 12 convenience stores in Houston, Texas, through a sale-leaseback transaction with Now & Forever, a regional convenience store chain, according to a GlobeNewswire announcement. This acquisition, structured as a long-term unitary net lease with an initial 15-year term and multiple renewal options, underscores Getty's focus on high-income areas and its confidence in the resilience of the convenience retail sector amid a cautiously balanced Houston market, as noted in the Partners Real Estate Q1 2025 report.

Houston's Convenience Retail Landscape: A Mixed Outlook

Houston's retail market in 2025 presents a paradox: low vacancy rates (5.3% as of Q1 2025) and rising rents ($20.87 per square foot) coexist with subdued consumer spending and elevated operational costs, according to CBRE's Q1 2025 report. CBRE's Q1 2025 report projects asking rents to increase by 1–2% annually, driven by limited new construction and persistent demand for prime retail locations. However, the convenience sector faces unique headwinds. Retailers cite high rents and reduced expenditures as major concerns, with Q2 2025 data showing a 66.9% quarterly drop in net absorption, per CBRE's Q2 2025 figures.

Despite these challenges, submarkets like the Far North (Spring, Texas) have demonstrated resilience, absorbing 160,000 square feet of new tenants in Q2 2025 (CBRE Q2 2025 figures). Getty's acquisition targets properties in the West and Southwest submarkets, areas characterized by higher-income demographics and strategic corner locations along major retail corridors, consistent with the GlobeNewswire announcement. This positioning aligns with broader consumer trends: as inflationary pressures persist, demand for essential services like convenience retail remains relatively stable compared to discretionary sectors (CBRE Q2 2025 figures).

Getty's Yield Strategy: Leverage, Scale, and Long-Term Security

Getty's Houston expansion is part of a $233 million year-to-date investment in convenience and automotive retail assets, generating an initial cash yield of 7.9%-well above the average for many commercial real estate sectors, according to the GlobeNewswire announcement. The sale-leaseback structure provides immediate liquidity for Now & Forever while securing Getty a predictable income stream through a unitary net lease, which transfers property-related expenses (taxes, insurance, maintenance) to the tenant, as described in the GlobeNewswire announcement.

The lease terms further mitigate risk: scheduled rent increases every five years and multiple renewal options ensure Getty can adjust cash flows in response to inflation or market shifts, per the GlobeNewswire announcement. This approach mirrors Getty's broader strategy of targeting sectors with recurring revenue potential, such as automotive retail and healthcare, where tenant stability is typically higher, as discussed in the Partners Real Estate Q1 2025 report.

Tenant Creditworthiness: A Double-Edged Sword

While Getty's lease structure offers operational flexibility, the absence of detailed financial disclosures for Now & Forever raises questions about tenant creditworthiness. Unlike national chains like 7-Eleven or Wawa-which reported $84.7 billion and $12.4 billion in 2025 revenues, respectively-Now & Forever operates as a privately held regional player with no publicly available credit rating, according to a financial performance review. This opacity contrasts with Getty's usual due diligence, which emphasizes tenant financial health as a critical risk buffer, as outlined in a Tenant Creditworthiness evaluation.

However, the lease's long-term nature and corporate guarantees (implied by the subsidiary structure) may offset some uncertainties. In a sector where consumer behavior is shifting toward discount and supply stores, the ability of Now & Forever to differentiate its offerings-such as its focus on made-to-order food-will be pivotal to maintaining occupancy and rent stability (CBRE Q2 2025 figures).

Broader Implications for Commercial Real Estate

Getty's Houston move reflects a broader industry trend: the search for yield in non-traditional sectors. As traditional retail and office markets grapple with e-commerce and remote work, convenience retail-anchored by its essential nature and localized demand-offers a compelling alternative, a point also raised in the Partners Real Estate Q1 2025 report. Yet success hinges on precise execution. The Houston market's 19% annual decline in construction pipeline and 20.8% year-over-year drop in leasing activity highlight the fragility of current gains (CBRE Q2 2025 figures).

Conclusion: A Calculated Bet in a Volatile Market

Getty Realty's Houston expansion is a testament to the delicate balance between risk and reward in commercial real estate. By leveraging high-barrier locations, long-term leases, and a sector with inherent demand stability, the company positions itself to capitalize on Houston's resilient retail market. Yet the absence of granular tenant data and the sector's exposure to macroeconomic headwinds-such as inflation and shifting consumer priorities-underscore the need for continued vigilance. As the convenience retail landscape evolves, Getty's ability to adapt its strategy while maintaining yield will determine whether this $100 million bet becomes a cornerstone of its portfolio or a cautionary tale.