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.