During the early days of the pandemic, experts anticipated that the slow death of brick-and-mortar retail would only speed up during lockdown. In some cases, they were correct, but other retail models proved resilient in unexpected ways—one of these being grocery-anchored retail. Even during a global pandemic, people have to eat. With many restaurants closed and prices spiking, consumers turned to cooking more at home, putting grocery stores center stage.
As the years have progressed and other issues like surging inflation and commercial rent have put increasing pressure on businesses, real estate investors are looking for sure bets to weather the times. Grocery-anchored retail seems to fit the bill, as JLL reports $13.3 billion in sales in this sector, with grocery shopping center transactions increasing 56 percent in the first quarter of 2022.
What investors recognize in grocery-anchored strip malls is the continuing power of foot traffic. Strong grocery chains like Kroger or Albertsons will continue to reliably draw customers to shop, and these customers often visit consistently and frequently. Other businesses that position themselves to capitalize on people visiting grocery stores, sometimes several times a week, can stand to benefit more from that enhanced visibility than standalone locations.
Grocery stores are particularly resistant to the bane of other brick-and-mortar operations, e-commerce. While grocery’s online presence has become more important with enhanced services like curbside pickup, most consumers still make regular visits to their neighborhood grocery even if they choose not to do their shopping in-store. And because there will always be a contingent who want to see their produce before they buy it, it’s not likely that physical grocery store locations will follow the same path as other brick-and-mortar retailers. This makes grocery-centered shopping malls a safer haven for investment, and brands that have previously targeted traditional malls for their locations, such as Crate & Barrel or Sephora, are more often looking to grocery-anchored locations instead.
Centers that are anchored by a community’s top grocers tend to perform best, but even those third and fourth ranked grocers, those catering to underserved communities, and specialty international markets, have seen increased attention from commercial real estate investors.
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