When most people think about retail real estate, they go to the big cities—Houston, Dallas, Los Angeles, and New York. And sure, those markets have their appeal, but here’s the thing: some of the best opportunities in retail real estate aren’t in those crowded urban centers. They’re in the HomeTown markets—the secondary and tertiary cities that most investors overlook.
The RockStep Capital team specializes in HomeTown markets because it’s a good investment. We can bring all of our skillset to bear in a HomeTown market. We can buy properties where there are fewer buyers, at a very competitive price, and we can put together the RockStep Coalition in these markets.
We’ve built our entire strategy around these markets because they offer a unique blend of stability, growth potential, and community engagement not found in larger metros.
The Building Blocks of a Strong HomeTown Market
When we look at a HomeTown market, we’re not just checking boxes. We’re asking one core question: What’s driving this market’s growth? Ultimately, a city’s stability is not enough. It needs real engines to propel its economy forward.
There’s got to be something driving population growth. You want at least a stable population, but in a perfect world, you want some population growth. Those drivers include major universities, government or research institutions, military bases, major tourism, Fortune 1000 companies, large employers that are expanding, and a major hospital district.
If a market checks a few of those boxes, that’s when we get interested.
A Case in Point: Rapid City, South Dakota
Take our shopping center in Rapid City, South Dakota, for example. This property is a textbook example of a market with essential growth drivers.
It’s in a state with no income tax, significant population growth, a strong university, major tourism, major military presence, and a strong hospital district—all the dynamics of essential markets. We were able to buy a well-located property inexpensively, and we’ve done very well there.
Our success at this property in Rapid City wasn’t a one-off win. It’s what happens when you follow the fundamentals and focus on the right markets.
The Role of Demographics and Affordability
Now, let’s talk about demographics—because they matter a lot. If a market’s population is shrinking, it doesn’t matter how cheap the real estate is—you’re setting yourself up for a tough ride.
If the population declines, it generally leads to less retail spending. You want markets with an increasing population because more people mean more demand for shopping centers.
And here’s the kicker—HomeTown markets often attract people because they’re more affordable. Lower housing costs and cheaper living expenses all draw people in, especially from expensive major metros. Housing and living costs are dramatically cheaper in a HomeTown market compared to the major metros, and that’s one of the driving forces for demographic growth.
This influx of new residents fuels retail demand, which is exactly what we’re after.
The RockStep Coalition: Building Local Partnerships
One of the biggest advantages we have at RockStep is our ability to align with the community. That’s what the RockStep Coalition is all about—bringing together local business leaders, civic leaders, and investors who actually care about the market’s success.
What sets these markets apart is their engaged business and civic leadership. We seek out leaders who are invested in the community (business owners, family offices, and foundations) and invite them to join our partnership, ensuring local representation.
These partnerships aren’t just for show. They’re critical to reducing risk and maximizing opportunities.
Reducing Risk Through Alignment
Alignment helps because it reduces risk. It makes it easier to secure entitlements, incentives, and property tax adjustments and strengthens relationships with city and county officials.
Local stakeholders know the market better than anyone. They help us navigate zoning issues, connect with government officials, and even act as unofficial leasing agents by bringing in tenants from their networks. You just don’t get this kind of involvement in bigger cities.
And honestly? It’s more fulfilling. It’s more fun because the community really cares. Our mission is to make HomeTowns better. We do that by maximizing the opportunities of an asset critical to the community’s quality of life. And that’s just inspiring for our company.
Why Retailers Are Flocking to HomeTown Markets
1. Lower Costs and Greater Expansion Opportunities
Over the last few years, we’ve seen a clear trend: Major retailers are starting to bet big on HomeTown markets. And it makes perfect sense. Over the last three to five years, there's been a trend for major retailers to enter smaller markets. Their occupancy costs are lower, and growth opportunities in major metros are restricted.
Retailers want to grow, but they’re running out of space in the big cities. HomeTown markets give them room to expand without the sky-high rent.
2. The Cannibalization Factor
Another reason retailers love these markets? Reduced cannibalization. This refers to when opening a retail location near another one of your own stores takes business away from your preexisting stores in the area.
In HomeTown markets, cannibalization is either nonexistent or extremely low. If Ross opens a store with three nearby and makes $10 million in sales, but the other stores lose only a combined $1 million, that’s a great result.
In big cities, opening a new location often just shifts sales from one store to another. In HomeTown markets, a new store taps into fresh demand.
3. The Halo Effect: Boosting E-Commerce Sales
Then there’s the halo effect, which is a game-changer for retailers.
The halo effect says if I open up a store, I’m not just making money from that store’s sales—I’m also seeing an increase in e-commerce sales within the geography of that store. It’s top-of-mind awareness for consumers. So when retailers expand into these markets, they’re boosting brick-and-mortar sales and increasing online sales in the region. It’s a win-win.
The Competitive Advantage: Limited Competition and Reduced Risk
One of the things I love most about HomeTown markets is how predictable the competition is.
In an enclosed mall, your competition might be one or two open-air centers, and they’re generally nearby. Because construction costs are so high, that might be the competitive landscape for the next five or 10 years. And that’s a very good position to be in.
In big cities, you’re always worried about new developments popping up and cutting into your market share. In HomeTown markets, that risk is minimal. The high cost of new construction makes it unlikely that a competitor will set up shop next door anytime soon.
The Right Retail Mix For Hometown Markets
In these markets, it’s all about middle-market retailers—those growing and appealing to a broad customer base.
Typically, the retail mix is more middle market. You don’t get the same blend of luxury. You want all the growth retailers—Michael’s, Hobby Lobby, Burlington, TJ Maxx, Marshalls, Ross, PetSmart, Petco, Aldi, Five Below, and Harbor Freight. These are the brands that consistently draw traffic and drive sales.
And when you can land tenants with investment-grade credit, you’re in an even better position.
Your center will be better if you can get national investment-grade credit retailers like TJ Maxx or Burlington. It makes lenders more confident and helps you sell the property. It’s all good stuff. Lenders love stable tenants, and so do future buyers.
Why RockStep Capital Excels in HomeTown Markets
1. A Proven Strategy With Reduced Risk
At RockStep Capital, we’ve fine-tuned this approach over the years. We’ve learned from our mistakes, gotten wiser, and we’re better at underwriting, estimating the sustainability of NOI, and determining the right markets. We’ve built a high-performing team and process. We’re just really good.
2. Disciplined Underwriting and Local Engagement
We focus on disciplined underwriting and building strong local partnerships. We underwrite a base case, identifying potential benefits, but we don’t overpay. We also build strong relationships with community bank lenders, government officials, and local investors who care about the community.
Why Hometown Markets Are Poised For Growth
Retail real estate is evolving, and HomeTown markets are leading the way.
The biggest misconception is that secondary or tertiary markets mean dangerous investing. But we believe that given how we buy—focusing on cash flow, credit quality, and community alignment—you can reduce risk and increase returns compared to primary markets.
We’re proud to be leaders in this space. We see ourselves as leaders in the country in investing in strategic assets in HomeTown markets. The future of retail real estate isn’t just in the big cities—it’s in the HomeTowns that form the backbone of America. And we’re excited to help lead the way.
If you’re looking for steady, sustainable growth and want to make a real impact, HomeTown markets are where you need to be.
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