What are some recent trends in the grocery sector?
According to REIS, while the overall vacancy rate for regional and super-regional malls was at 9.3% for the second quarter, grocery store anchored malls only showed a 7.7% vacancy rate. Cap rates for net lease grocery stores averaged 7.81%, on par with the national net lease average of 7.75%. However, it is important to note that grocery stores typically have a large footprint and many retailers with large footprints couldn’t weather the recession (Circuit City, Border Books). Net lease grocery stores on the other hand made it through relatively unscathed and are considered one of the best performing asset classes.
As in any real estate investment, it’s important to determine the underlying residual value of the real estate. The most attractive grocery store investments have the basics: ample parking, locations in high traffic corridors, good demographics, and growing neighborhoods. It’s also important to study the competition in the area, the price per rentable square foot, the vacancy rates of properties nearby, and the credit rating of the tenant. It is helpful to analyze the store sales per square foot but many times, tenants aren’t required to disclose that information.
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Jonathan Hipp
Jonathan Hipp began his career in real estate over 25 years ago. In his early years as a broker, he ventured into the net lease industry and quickly began leading the US net lease market, closing over $3 billion in transactions. In 2005, Jon founded Calkain Companies, a company focused solely on net lease investment services. As President and CEO, he has been instrumental in building the firm into one of the leading Net Lease real estate companies, transacting over $12 billion of net lease deal volume over the past 13 years. He has expanded Calkain’s services to include brokerage, advisory, asset management, capital markets, and industry research. He has become a well-known resource, panelist, and speaker at various Net Lease and Industry conferences and is a regular contributor to GlobeSt.com on real estate trends. In June 2015, Jon’s passion for the real estate business was again recognized as he was nominated for the Top Real Estate Player in the DC area by SmartCEO magazine.
