Outside Landlords Upgrading Retail Centers Face Unexpected Community Resistance, Broker Warns

Written by:

Rudi Davis

Date:

22 Jan 2026

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Outside investors acquiring retail properties in secondary markets with plans to upgrade tenant quality are discovering an uncomfortable reality: financial strategies that promise higher returns on paper often meet resistance from established local business communities.

Kelly Schnebly, Partner at Colliers Idaho, says the conflict becomes clear when new landlords attempt to reposition centers dominated by local tenants. “There are centers where new or newer landlords from out of town want to improve tenant quality and do facade upgrades,” Schnebly explains. “But here, we have a project that’s 80% local mom-and-pop tenants.”

The financial calculation is simple, Schnebly says: raising rents and upgrading properties often prices out the very tenants who fill most of the space. “A lot of those mom-and-pops can’t make it paying those higher rents,” she notes.

The Perception Problem

Differing priorities between outside owners and local brokers compound this tension. Schnebly describes a constant balancing act. “It’s a tug of war between keeping existing tenants and improving rental rates,” she says. “There’s pushback from the community and from other tenants when they see this happening.”

Schnebly emphasizes that outside landlords are often less concerned about community perception. “These landlords are outside the market and don’t really care what their perception is,” she says. “But we’re working in the market.” As local brokers, they face the consequences of adverse reactions from both tenants and the broader community.

This dynamic places practical limits on how aggressively outside owners can pursue financial optimization. “We can’t just kick everybody out,” Schnebly says.

The Strategic Compromise

To address these challenges, Schnebly advocates for a more targeted approach. Rather than pushing out large numbers of small tenants, she encourages landlords to work with higher-quality local tenants and to be selective about which spaces to upgrade and where to raise rents.

“Let’s find some of these better quality local tenants to work with and then be a little more strategic about what we’re improving and where we’re pushing the rental rates,” Schnebly advises outside owners.

This approach recognizes that retail centers embedded in local communities have constraints not reflected in financial models. These limits only become visible when investors attempt to implement broad improvement strategies.

A key question remains: are these constraints a short-term friction as new capital enters secondary markets, or do they represent a lasting limitation on how quickly and aggressively retail properties can be repositioned in areas with established local tenants?

The Broader Capital Flow Question

This scenario is increasingly common as institutional and private investors target secondary markets for retail acquisitions. In major metros, upgrading underperforming assets and replacing tenants is a well-worn strategy. Schnebly’s experience suggests that, in smaller markets where local businesses fill most spaces and community perception matters, this approach may need significant adjustment.

For outside investors, this could mean accepting longer repositioning timelines, higher vacancies during transitions, or lower ultimate rents than initially projected. Attempting to displace local tenants rapidly often triggers pushback not just from brokers but from the community itself, complicating execution even for investors unconcerned with local opinion.

Whether these challenges are a temporary learning curve or a persistent structural issue will become clearer as more repositioning projects move forward in secondary markets over the next several years.