Exploring the Potential of Grocery-Anchored Shopping Centers

Acquisition activity in the grocery-anchored shopping center sector would suggest  these assets are a popular type of investment.¹ They usually house a grocery tenant alongside a mix of other retailers and service providers. Here are five reasons why we think grocery-anchored shopping centers may be  worth a look.

1. Essential retail: Grocery-anchored centers are anchored by essential retail – grocery stores. No matter the economic climate, people need to eat, which makes grocery shopping a regular and necessary activity.² This fundamental need generally creates a steady customer flow and consistent sales, making these centers a relatively recession-resistant investment compared to retail properties driven by discretionary spending.¹

2. High foot traffic: Grocery stores typically attract a large number of shoppers on a regular basis, which typically can result in high foot traffic for the entire retail center. This constant flow of customers increases the potential for sales among the other tenants in the center and may contribute to higher NOI.³

3. Tenant diversity: Grocery-anchored centers often include a mix of tenants that provide a range of services and goods, from restaurants and banks to personal care stores and specialty retailers. This tenant diversity may reduce the dependence on any single tenant.⁴

4. Location advantage: These centers are usually located in densely populated residential areas, which may help contribute to a ready customer base. The strategic location also typically supports steady property values and rent rates.⁵

5. E-commerce resistant: While many sectors of the retail industry have been affected by the surge in online shopping, grocery shopping remains a largely in-person activity. Although online grocery shopping has grown, many consumers still prefer to physically choose their fresh produce and other food items. This helps to protect grocery-anchored centers from the disruption of e-commerce.⁶

In addition to more general risks such as high vacancy rates, oversupply of product in the market, and credit quality of tenants, some of the factors that can impact the success or failure of retail investments include the length of the lease(s) and whether it’s single or multi-tenant.

Investors can find a variety of commercial real estate offerings like these across different categories on the CrowdStreet commercial real estate investing platform.

¹https://commercialobserver.com/2023/05/grocery-anchored-retail-2023/ 
² https://www.us.jll.com/en/trends-and-insights/research/grocery-tracker
³https://www.wealthmanagement.com/retail/grocery-anchored-shopping-centers-remain-demand-they-are-going-mostly-private-and-all-cash 
⁴https://www.wealthmanagement.com/retail/value-add-opportunities-grocery-anchored-sector-are-hard-find-and-even-harder-execute
⁵https://www.wealthmanagement.com/retail/suburban-retail-has-been-outperforming-urban-properties-will-trend-continue
⁶https://www.wealthmanagement.com/retail/more-investors-eye-grocery-anchored-shopping-centers-better-risk-adjusted-returns

Market volatility or lack of liquidity could impair an investment’s profitability or result in losses. Factors such as high vacancy, oversupply of the product in the market, increase in interest rates for borrowing loans, bad credit quality of tenants occupying the property, general economic risks such as interest rates, availability of credit, inflation rates, economic uncertainty, changes in laws and general overall deterioration of the market in which the asset sits, all of which could lead to financial difficulties and impact net operating income and can depreciate the value of the property. These factors, in addition to others including increases in the costs in excess of the budgeted costs, the burdens of ownership of real property, environmental liabilities, contingent liabilities on disposition of assets acts of God, pandemics and other national, regional or local emergency conditions, terrorist attacks, and war may affect the level and volatility of asset prices and the liquidity of investment assets.

This article was written by an employee(s) of CrowdStreet and the contents of this publication are for informational purposes only. Neither this publication nor the financial professionals who authored it are rendering financial, legal, tax or other professional advice or opinions on specific facts or matters, nor does the distribution of this publication to any person constitute an offer, recommendation, or solicitation to buy or sell any security or investment product issued by CrowdStreet or otherwise. The views and statements expressed are based upon the opinions of CrowdStreet. All information is from sources believed to be reliable. This article is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any investor. All investing involves risk, including the possible loss of money you invest, and past performance does not guarantee future performance or success. All investors should consider such factors in consultation with a professional advisor of their choosing when deciding if an investment is appropriate. CrowdStreet assumes no liability in connection with the use of this publication.