Grocery stores have been a bright spot for strip mall REITs during the COVID-19 pandemic. BTIG consultants say there's one step REITs can take to help their grocers further cement their status as anchors and to smooth the transition to online delivery.
That's the addition of microfulfillment centers—a trend that is growing in the industry—into the backs of grocery stores. The $2 million-$3 million investment "could fix critical gaps in online grocery fulfillment, increase store productivity, and make REIT shopping centers even more critical real estate," BTIG analysts Michael Gorman and James Sullivan say in recent research note.
Before COVID-19, grocery was an area of retail that had proven resistant to e-commerce trends, with only 2%-6% of sales being conducted online. The pandemic has changed that, with some estimates now as high as 40%. "We think that the COVID-19 pandemic and resulting stay-at-home orders have the potential to act as a 'forced adoption' event for online grocery and potentially change other shopping habits," the consultants write. "A more permanent shift to online grocery shopping could mean more risk to strip center results and valuations relative to historical norms," they conclude.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
