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JLL Explains What’s Driving Investor Appetite for Grocery-Anchored Retail
By Dennis Kaiser
Grocery expansions slowed in 2017, as brands took a step back to examine existing footprints and reevaluate company strategies. According to research by JLL Retail, grocers that performed well in 2017 focused on healthy foods, affordable offerings, private labels, and improving digital platforms.
Among the other top-line findings of JLL’s 2018 U.S. Grocery Tracker report, were that investors displayed an increased appetite for grocery-anchored assets while store expansions tapered off in 2017. While new grocery store openings reached 13.4 million square feet, that represented a decrease of 28.8% year-over-year.
JLL’s James Cook notes that more than a third of new grocery store openings were in just three states: California, North Carolina and Virginia. Meanwhile, investment into grocery-anchored centers increased 5.3% year-over-year.
Cook points out that grocery openings were down, as some grocers reined in expansion plans. However, grocers still expressed confidence in California’s markets, with 1.6 million square feet of new store space coming to market. Virginia and North Carolina each experienced strong growth, with roughly 2.7 million square feet opening across both states. While Texas was still one of the hottest states for grocery expansion, the amount of new supermarkets in the state tapered off this year to 1.2 million square feet, a dip from three million square feet in 2016.
Successful grocers tended to focus on the shopper experience by offering fresh, healthy and affordable products, elevating brand loyalty through private labels, and investing in digital platforms.
One of the most talked-about mergers of 2017 was Whole Foods and Amazon. This new partnership demonstrates the value of an omnichannel strategy for grocers. The extensive national network of established physical stores benefits Amazon, while Whole Foods has the opportunity to become a more easily consumable brand.
Looking ahead, Cook says trends to follow include: smaller and more focused stores, data driven technology, a coming wave of Blockchain technology, partnerships and consolidations, as well as the emergence of rapid checkout technologies.
For comments, questions or concerns, please contact Dennis Kaiser
