A lingering question over the past few years has concerned the viability of dollar stores recent success. As the recession forced many consumers to become more cash conscious, dollar stores enjoyed heightened sales and new expansion. Though net lease investors were originally skeptical, the continued success of tenants like Dollar General – whose credit rating was recently increased to BB+ by S&P – has gone a long way in lending the trend creditability. Furthermore, as if receiving a blessing from the Pope himself, Wal-Mart has developed plans for new, smaller stores, similar to dollar stores called “Wal-Mart Express”. These developments, along with the lingering economic quagmire, point to a stable future for dollar stores.

A simple reality of our current economic climate is that although prime markets such Washington DC, New York, Chicago and Miami have witnessed economic recovery, many rural areas continue to plod through the trenches. While many tenants such as Walgreens and even some Big Boxes are seeking out these thriving urban areas (and specifically avoiding tertiary ones), Dollar Stores have taken the opportunity to fill this niche. As an example, Dollar General has over 8,000 stores in 35 states. Their targeted demographics are areas with a median household income under $75,000 and a trade area of at least 4,500 people. Other retailers, such as Walgreens, typically require areas with a higher median household income and trade areas of 20,000 or greater. The new Wal-Mart express concept is following a similar demographic profiling strategy. The 15,000 sq ft stores (1/10^th the size of Wal-Mart Superstores) are being developed in both urban and rural areas. Furthermore, Wal-Mart Express seems to be specifically challenging dollar stores – competing for the same customers. Recently, a Wal-Mart Express was opened almost a half-mile away from a Dollar General located in rural Gentry, Ark.

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