State of the Market: Grocery Anchored Centers

JULY 15, 2019 | THE PALOMAR GROUP

Over the past three years the evolution of retail is one of the most frequently discussed topics in the CRE industry.  Here are some interesting takeaways from the State of the Market Bisnow Conference recently held in Atlanta on how retail most definitely is evolving and thriving. 

Millennials value experience over ownership, and shopping center owners and grocers are taking notice. Owners and grocers are placing a tremendous amount of value in how often customers are coming to their store. Some owners are just as concerned with store visits as they are tenants’ sales. Owners are looking for entertainment drivers, such as premium movie theaters, restaurants, bars, and ax throwing stores. In 2014, Fuqua Development developed a Sprouts anchored center in Atlanta (Peachtree Corners), and within two years, seventeen restaurants opened within the immediate vicinity. At first, there were concerns that their store would suffer. However, sales rose after the restaurants opened, and became one of the top performing Sprouts. Grocers are realizing that health centers, restaurants, and other entertainment venues benefit shopping centers, and they have become more lenient on co-tenancy clauses.

In today’s negotiations between grocers and shopping center owners, grocers have the upper hand. Grocers are not growing as fast as they were five to ten years ago, so they are able to be more selective with their site locations. Kroger, for example, opened twenty stores in 2018. Whereas, ten years ago, they opened close to one hundred new locations a year. Competition is not only coming from other grocers and online providers, grocers are going up against home improvement and office supply stores for paper towels, toilet paper, and household items. In order to combat their competitors, grocers are reinvesting in their stores and partnering up with digital and delivery services. In 2014, Kroger had $0 in online sales. In 2018, they did $5 billion in online sales. Grocers and owners are using tracking services to analyze customer visits. They use cell phone data that can tell them how many people are coming in their store, how long they were in there, and where they go after they leave the store.

For more information on the continued evolution of Grocery Anchored Centers or if you’d like to discuss Grocery Anchored Centers listed for sale by the Palomar Group please give us a call.