July 28, 2022

Why the Grocery-Anchored Retail Strategy is Flourishing

Hanbury Village in Chesapeake, Virginia

There are several changes being made in the investment asset acquisition process, causing a shift in portfolio strategy and risk evaluation for many. As a result, we are seeing growth in the attraction of grocery-anchored retail centers for real estate investors.

On their own, retail investments are an asset class that have grown in demand over the last twenty years. Specifically, grocery-anchored shopping centers are becoming one of the most sought-after properties as they have been grouped in a category of “pandemic-resistant” real estate. 

A grocery-anchored shopping center is a retail center that has a major grocery store as its largest tenant, leasing the most available space, with smaller tenants in the surrounding area. Grocery stores in shopping centers hold value due to their necessity, adaptability, and performance. During asset acquisition for Armada Hoffler, we focus on grocery-anchored centers in densely populated areas with high credit tenants around. They prove to be a great option for investors looking to generate better risk-adjusted returns.

Recently, consumers are paying more attention to what they are spending their money on. People are looking to purchase necessity-based goods and services, rather than non-essentials. 

While many industries are finding that e-commerce and online shopping are dominating the consumer market, U.S. Census Bureau data tells us that 97% of grocery sales are still in physical stores. 

A large percentage of consumers rely on their senses to purchase necessities like food and toiletries. The consumer experience plays a key role in why customers choose to purchase their groceries in-store rather than online. While it may seem convenient to place an online order to pick up your groceries, you may not be getting the same quality that you would get in-store. This may be the reason many opt to choose the items themselves.

Brick-and-mortar grocers also have the advantage of using the digital world as a marketing tool to drive foot traffic into their physical location. Smartphone apps, paid advertisements, and social media are great ways to gain the attention of customers, giving them the incentive to shop in-store. 

A grocery-anchored retail strategy is a useful tool for portfolio diversification. Historically grocery-anchored retail investments remain resilient in tough times. Think about it – people have to eat regardless of their financial position. These properties tend to generate steady income and occupancy solely because they provide basic needs for the communities they belong to.

Elements that can influence the success of grocery-anchored retail include a reliable grocery store and a strong market to cater to. These factors are crucial in generating traffic to the store and yielding positive results for the overall shopping center. 

If consumers consistently have positive experiences at a specific grocery store, they are likely to revisit on a weekly basis. Some may even visit nearby stores while they are in the area. For this reason, popular grocery stores as anchor tenants can help smaller tenants gain credibility.

Click this link to learn more about our property portfolio and find out which of our commercial real estate assets use this grocery-anchored retail strategy! 

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