Investing in Grocery Stores and Food Markets: Trends, Returns, and Risks

04/30/2025

Industry Insights

Grocery stores and supermarkets have long been the cornerstone of neighborhood shopping centers, providing essential goods that drive consistent foot traffic. In recent years, investing in grocery store-anchored real estate has gained significant momentum among institutional and private commercial real estate (CRE) investors. This interest is fueled by the recession-resilient nature of grocery retailers and the stable returns offered by long-term triple net leases. Whether you’re an investor seeking steady income, a broker analyzing deal flow, a developer planning a retail project, or a 1031 exchange advisor looking for a secure replacement asset, the grocery-anchored CRE segment offers compelling opportunities. This article explores current trends, expected returns, potential risks, and actionable insights into grocery store real estate investments.

Resilient Demand Drivers: Food Security and Foot Traffic Synergy

Essential and Recession-Resilient: Grocery stores are considered “essential retail,” a fact underscored during the pandemic when supermarkets remained open as other retailers shuttered. Shoppers will buy food in any economic climate, making grocery-anchored properties relatively recession-proof. Industry experts often dub them an all-weather asset class; as one retail executive noted, grocery stores are “recession proof in so many ways” – people need to eat regardless of economic cycles. During downturns, consumers might trade down to value-oriented grocers but they won’t stop grocery shopping. This fundamental food security ensures a baseline of demand that buoys grocery-anchored real estate even when other retail sectors falter.

Foot Traffic and Cross-Shopping: Grocers attract more foot traffic than any other retail category, and this high visitation frequency creates powerful synergies for co-located tenants. A supermarket can draw hundreds (if not thousands) of customers per day, benefitting adjacent businesses like cafes, pharmacies, and service providers. These small shops often cluster around a grocery anchor precisely to capitalize on its steady customer flow. In turn, landlords can achieve higher occupancy and rent for those inline spaces. According to CBRE research, grocery-anchored shopping centers have among the lowest vacancy rates in retail (availability hit an all-time low around 6.9% at the end of 2022), and landlords report that supermarket anchors embolden other retailers to pay a premium for space due to the guaranteed traffic. The grocery store serves as the community’s retail heartbeat – a dynamic evident for centuries (even ancient markets were food-centered!). Today, as long as fresh food stands at the center of communities, grocery-anchored centers will continue to enjoy robust foot traffic and tenant demand.

Consistent Cash Flow and Investor Appeal: For real estate investors, the reliable consumer need for groceries translates into reliable rent payments. Even in 2023’s choppy investment sales climate, grocery-anchored assets stood out. Sales of grocery-anchored shopping centers totaled over $14.5 billion in 2022 (a decade high), and investment in these properties in 2024 has reportedly surpassed 2023 levels according to JLL. Private equity, REITs, and 1031 exchange buyers alike are drawn to supermarkets as anchors because of their stable performance. Indeed, grocery-anchored retail is now seen as a safe haven within the broader retail sector – a bright spot characterized by high occupancy and resilient NOI growth. Limited new retail development (U.S. retail construction hit a record low of ~17 million square feet in 2024, per NAIOP) has further bolstered existing grocery centers, as minimal new supply and steady population growth create favorable supply-demand dynamics. In short, essential need + steady traffic = a recipe for durable income streams that investors greatly value.

Triple Net Lease (NNN) Structures: Stable Returns with Minimal Management

How NNN Leases Work: A large portion of single-tenant grocery stores and even anchor leases in multi-tenant centers are structured as triple net leases. In a NNN lease, the tenant pays not only base rent but also covers the property’s operating expenses – property taxes, building insurance, and maintenance (often including common area maintenance for shopping centers). This structure is appealing to landlords because it provides net rent that isn’t eroded by variable expenses. For example, a national grocery chain like Kroger or Publix might sign a 15-year NNN lease for a standalone supermarket: the grocer is responsible for upkeep and costs, and the landlord simply collects rent checks. The result is a steady, bond-like income stream for the property owner, often with contractual rent increases over time. Such passive income is particularly attractive to private investors and 1031 exchangers looking to defer taxes into a “hands-off” property. In essence, an investor can own the grocery store’s real estate while the tenant handles day-to-day property obligations – a win-win that makes NNN grocery deals highly sought-after.

Attractive Cap Rates and Long-Term Tenancies: Grocery-anchored assets generally offer competitive cap rates relative to their low risk profile. Cap rates (net operating income divided by purchase price) for well-located supermarket properties have historically been in the mid 5% to low 6% range for top-credit, single-tenant deals, and in the high 6% to 8% range for multi-tenant grocery-anchored shopping centers (which carry a bit more leasing/management responsibility). These yields have ticked up slightly with rising interest rates – recent surveys show average net lease retail cap rates around 6.5%–7% by late 2024 – yet grocery-anchored centers remain at the lower end of the cap rate spectrum (signifying higher value) compared to other retail. Investor demand has kept pricing for grocery-anchored deals relatively firm. The combination of long lease terms and investment-grade tenants means buyers are willing to pay a premium (accept a lower cap rate) for supermarkets. It’s common to see initial lease terms of 10 to 20 years for a grocery anchor, often with multiple 5-year extension options that can stretch occupancy well beyond two decades. Such longevity in tenancy, backed by the essential sales of a grocery business, underpins consistent returns for landlords. Even as market cap rates fluctuate, the uninterrupted cash flow from a triple net lease to a quality grocer provides stability through market cycles.

Tenant Quality and Credit: The strength of the tenant is paramount in NNN grocery investments. Fortunately, many grocery chains are large, well-capitalized firms with investment-grade credit ratings or strong private financials. National and regional supermarket operators (think Kroger, Albertsons/Safeway, Ahold Delhaize (Stop & Shop/Giant Food), Publix, Whole Foods (Amazon), etc.) generate billions in annual revenue and have proven operating models. This creditworthiness gives landlords confidence that rent will be paid on time and the lease honored in full. Moreover, these companies often guarantee the lease at a corporate level. From an underwriting perspective, grocery tenants usually report healthy store sales relative to rent (occupancy cost ratios are often reasonable, since groceries run on thin margins but high volume). It’s also worth noting that grocery anchors tend to renew their leases if the location is performing – relocating a supermarket is costly and risks losing a built-up customer base. This leads to high renewal probabilities and long-term occupancy. Of course, not all grocers are created equal: investors will diligence the format and market position (e.g. a discount grocer like Aldi vs. an upscale organic grocer vs. a local independent) to assess risk. On balance, a well-established grocery tenant on a NNN lease is about as solid a retail tenant as one can find, often ranking with pharmacies and home improvement stores as “safe” net lease bets. That high tenant quality directly translates into steadier returns and lower default risk for the property owner.

Occupancy and Income Stability: One of the hallmarks of grocery-anchored properties is high occupancy. Grocery anchors themselves drive this stability – their presence keeps the center relevant and in-demand. In grocery-focused REIT portfolios, occupancy rates are routinely in the mid to high 90% range. For instance, Phillips Edison & Company (a REIT specializing in grocery-anchored centers) reported portfolio occupancy around 98% in 2024. Even during economic slowdowns, shoppers continue to visit supermarkets regularly, which helps keep ancillary tenants (from the bank branch to the nail salon) in business. Landlords also benefit from the long-term nature of grocery anchor leases, which removes a major chunk of space from rollover risk for many years. That anchors are usually leased on NNN terms further stabilizes net income – if taxes or insurance costs rise, those increases are passed through to the tenant, not the landlord. The stable occupancy and NNN expense structure mean that net operating income (NOI) from grocery properties is comparatively predictable year to year. Many investors view grocery-anchored centers as “defensive” assets in their portfolio – assets that can weather recessions with only minor hits to rent or value. This predictable income doesn’t usually produce sky-high returns, but as part of a diversified CRE investment strategy it provides a reliable, lower-risk return profile. In uncertain times, that consistency is incredibly valuable.

Grocery-Anchored Shopping Centers: Synergies and Fundamentals

The Neighborhood Center Format: Beyond single-tenant properties, a common way to invest in this sector is via neighborhood or community shopping centers anchored by a grocery store. These centers typically range from 50,000 to 300,000 square feet and feature a supermarket plus a mix of smaller shops and services. The grocery anchor often occupies 30–50% of the GLA (gross leasable area) and serves as the primary traffic driver. From a leasing perspective, grocery anchors often receive favorable lease terms (lower rent per square foot, tenant improvement packages, etc.) in exchange for the traffic they generate. Landlords recoup that investment as the grocer’s presence helps lease up the remaining stores at higher rents. Common co-tenants in a grocery-anchored center include pharmacies (e.g. CVS, Walgreens), dollar stores, quick-service restaurants (in outparcels), fitness centers, hair salons, pet supply stores, and other everyday necessity retailers. This merchandise mix creates a convenient one-stop shopping experience that appeals to time-strapped consumers. Importantly, the sales at these smaller shops are boosted by adjacency to a busy grocery store – for example, someone doing their weekly grocery run might also pick up a coffee, drop off dry cleaning, and get a takeout meal from the same center. This synergy is why many retailers actively seek space in grocery-anchored centers. For investors and developers, a strong anchor grocer effectively “de-risks” much of the center’s space by ensuring a baseline level of shopper traffic that individual specialty retailers could never generate alone.

High Occupancy and Tenant Mix: Grocery-anchored centers generally enjoy higher occupancy rates than unanchored strip centers or outdated malls. As noted, national data shows vacancy in open-air centers at record lows. Many grocery-anchored centers operate at 95%+ occupancy, especially in primary trade areas. Grocery operators themselves tend to occupy a space for decades if it remains profitable – some supermarket locations can anchor a center for 20, 30, even 50+ years (with remodels along the way). This anchors’ stickiness reduces turnover costs for landlords and provides an “anchor” in every sense for the asset’s cash flow. The small-shop tenants in these centers may rotate over time, but those spaces are typically backfilled quickly when an anchor is in place. New entrepreneurs and national chains alike target busy centers to ensure visibility and traffic. Furthermore, many grocery-anchored centers have evolved to incorporate service-oriented and experiential tenants that are more e-commerce-proof – think medical clinics, daycare centers, gyms, or municipal services – which increases the center’s role as a community hub. All of this contributes to steady occupancy. Investors looking at an acquisition will closely review the center’s tenant roster and lease terms. Key metrics include the percentage of gross income coming from the anchor vs. shop tenants, the weighted average lease term (WALT) remaining, and any upcoming large expirations. Typically, a diversified tenant mix with staggered expirations and a strong anchor yields the best risk-adjusted returns for the owner. In practice, grocery-anchored centers have proven remarkably resilient: even when smaller stores cycle out, landlords can often re-lease the space at equal or higher rents because the grocery anchor keeps consumer traffic consistent.

Synergy in Action – A Virtuous Cycle: It’s worth emphasizing how grocery-anchored centers create a virtuous cycle of success. A busy supermarket draws in regular shoppers multiple times a week. This consistent traffic makes the center an attractive location for other businesses, from nail salons to sandwich shops, who know they will have built-in visibility. As more complementary tenants open and succeed, the center becomes even more convenient and “sticky” for local shoppers – they can accomplish several errands in one trip. This, in turn, drives more traffic to the grocery store and other anchors. The synergy reinforces itself. Landlords benefit through higher tenant retention and the ability to push rents gradually upward due to strong demand for the limited available shop space. In many cases, grocery stores also collaborate with their center co-tenants on events or cross-promotions (for example, a fall festival in the parking lot that brings families out, benefitting every store). The net effect is that a well-curated grocery-anchored center effectively becomes part of the social fabric of its community. Consumers think of it as their go-to place for daily needs, which is exactly what investors want – a stable, ingrained revenue generator. This community-centric aspect gives grocery-anchored real estate a qualitative advantage: these properties often face less volatility because they’re not just retail centers, they’re essential community infrastructure.

New Store Development and Portfolio Expansion

Selective New Construction: Unlike many retail categories that have seen a pullback in expansion, grocery chains are actively pursuing new store growth and fuel a good portion of new retail development. In fact, several markets are experiencing a mini-boom in grocery-anchored construction. Texas, for example, leads the nation – the Dallas-Fort Worth metro alone has over a dozen grocery-anchored projects planned or underway for 2024. According to local market research, Texas has roughly 2.2 million square feet of new grocery store space planned for 2024, with Florida (around 0.57 million sq. ft.) and California (0.34 million sq. ft.) also seeing notable grocery development pipelines (ICSC). These projects range from brand-new neighborhood shopping centers anchored by major chains to the redevelopment of older shopping centers where a modern grocer is backfilling a vacant big box. Developers are keen on grocery anchors because having a pre-leased supermarket can often secure financing for the rest of a project. From the grocer’s perspective, many are using new stores to penetrate growing suburbs and capture market share. For instance, fast-growing chains like Aldi and Grocery Outlet have been aggressively opening stores across the country (Aldi opened over 100 stores in 2024 alone). Even traditional giants like Publix, H-E-B, Trader Joe’s, Sprouts Farmers Market, Whole Foods, and regional players are selectively adding locations where demographic growth and voids in grocery coverage present ripe opportunities. The result is a steady flow of new grocery-anchored inventory coming online, though still modest by historical standards.

Redevelopment and Rollouts: Another trend is grocery chains reinvesting in their existing footprints through remodels and rollouts of new formats. With strong profits earned during the pandemic years, many grocers have a “war chest” for capital improvements. These funds are being plowed into updating stores with modern decor, expanded fresh and prepared food sections, and integrations for online order pickup. Some chains are experimenting with smaller urban concepts or larger flagship stores in power centers. For example, we’ve seen traditional grocers like Kroger testing stores over 100,000 SF in size to serve as both retail and distribution hubs, while also rolling out smaller-format stores for dense urban neighborhoods. On the flip side, big-box retailers such as Target and Walmart are adding more grocery square footage to their stores or opening grocery-focused offshoots, effectively increasing the “grocery anchor” presence in retail real estate. Mergers and acquisitions also shape expansion strategies: the highly publicized Kroger–Albertsons merger (though facing regulatory hurdles) reflects consolidation that could lead to some store divestitures or rebrandings. Meanwhile, acquisitions like Aldi’s purchase of Winn-Dixie and Harvey’s in the Southeast (2023) allow rapidly expanding grocers to enter new markets by absorbing existing store leases. From an investment standpoint, new store construction and portfolio expansion signal the grocery sector’s relative health. Developers and investors keeping an eye on these rollouts can find opportunities – for instance, acquiring a newly built grocery-anchored center from a developer (who might exit upon stabilization), or repositioning older centers by courting one of the expanding grocers to take over a vacant anchor space. It’s clear that brick-and-mortar grocery is not in retreat; it’s evolving and, in many areas, growing, which bodes well for the real estate that supports it.

“REITs with Eats” and Institutional Activity: The robust performance of grocery-anchored assets has not gone unnoticed by Wall Street and institutional investors. Publicly traded shopping center REITs, sometimes nicknamed “REITs with eats,” have been actively acquiring and merging to grow their grocery-anchored portfolios. Kimco Realty’s pending $2 billion acquisition of RPT Realty (adding 56 more grocery-anchored centers) and Regency Centers’ 2023 acquisition of Urstadt Biddle Properties are prime examples of consolidation focused on grocery-anchored assets. These moves underscore how institutions view grocery-anchored centers as a strategic long-term play. One Altus Group analyst quipped that grocery-anchored REIT stocks are getting “snatched up” by institutional investors due to their recession-resilience and high foot traffic metrics. In private markets, we also see players like insurance companies, pension funds, and sovereign wealth funds targeting grocery-anchored retail in joint ventures or portfolio acquisitions. For example, in late 2023 J.P. Morgan’s real estate arm acquired a majority stake in a Queens, NY grocery-anchored center (with a Stop & Shop anchor), highlighting institutional confidence in the neighborhood center format. All this activity means liquidity in the grocery-anchored space is high – investors can find exit opportunities when needed, and buyers remain plentiful for quality assets. In sum, new development, store expansion, and institutional investment trends all point to a grocery-anchored real estate sector that is thriving and poised for continued stability.

Emerging Trends: Hybrid Fulfillment, Dark Stores, and Tech Innovation

Omnichannel Grocery & Hybrid Fulfillment: The rise of online grocery ordering has led supermarkets to adopt hybrid fulfillment models that blend brick-and-mortar and digital. Rather than threaten physical stores, e-commerce is being harnessed to enhance them. Most large grocers now offer curbside pickup and home delivery options, with the local store as the fulfillment center. This has influenced real estate decisions in subtle ways: stores are dedicating parking lot space for pickup vehicles, adding drive-thru lanes or canopy-covered loading areas, and configuring backrooms to handle online order staging. Some have even built micro-fulfillment centers within or adjacent to stores – essentially mini warehouses with automation to quickly assemble orders. The goal is to leverage the store’s proximity to customers (“last-mile” advantage) while meeting the convenience of online shopping. While fulfillment services add operational costs for grocers, they are increasingly necessary to stay competitive. Investors should note if a property has the layout to accommodate these services (ample parking, etc.) as it can impact a store’s long-term viability. Importantly, despite double-digit growth in online grocery sales, the vast majority of grocery spending remains in-store – estimates suggest only around 10–15% of grocery sales occur online in 2023–2024. Shoppers have largely returned to physical stores for their weekly groceries, often preferring to select fresh items in person. Even those using online grocery tend to favor pickup from a local store (rather than pure delivery) as their preferred method of receiving orders. So, the physical grocery store continues to play a critical role in the omnichannel strategy, essentially functioning as both retail venue and distribution node. For real estate, this hybrid model reinforces the importance of having well-located, well-designed stores that can serve customers in multiple ways.

“Ghost Grocers” and Dark Stores: A notable trend accelerated by the pandemic is the concept of “ghost grocery stores” – retail spaces or warehouses that are not open to the public but used exclusively to fulfill online grocery orders. These dark stores emerged as a way for grocers and startups to meet delivery demand without congesting active retail aisles or to instantly enter dense urban markets where opening a full supermarket might be impractical. Companies like Kroger, for instance, have experimented with automated fulfillment centers (often in partnership with Ocado) that operate as delivery hubs without a traditional shopping floor. Startups in large cities have launched dark-store grocery delivery services promising 15-minute delivery from small fulfillment centers tucked into neighborhoods. While some of those ultrafast delivery ventures have faced challenges, the ghost kitchen/ghost grocer concept continues to influence strategy. Traditional grocers may convert portions of underperforming stores to dark fulfillment areas, or open hybrid stores that have a public-facing section and a closed-off fulfillment center in back. For landlords and developers, ghost grocers introduce new uses for retail real estate: an empty big box in a city suburb might be repurposed as an online-only grocery warehouse, for example. However, pure-play dark stores are still a relatively small slice of the industry. Most operators favor the hybrid approach of using existing stores to fulfill orders. Investors should stay aware of this trend – if a location has very high online order volume, it’s conceivable a tenant could shift it to a “dark” store in the future, which might change traffic patterns at the center. On the flip side, if a grocer vacates, one potential backfill could be a different retailer using the space for distribution rather than retail (which might affect lease economics). Overall, ghost grocery stores represent the grocery sector’s push to serve convenience-driven consumers, and it highlights the adaptability of grocery-anchored real estate to new fulfillment models.

Tech in Stores: Self-Checkout and Beyond: Technology is rapidly changing the in-store grocery experience in ways that can benefit profitability (and by extension, rent stability). Many supermarkets have implemented extensive self-checkout areas, reducing labor costs and speeding up transactions for customers with smaller baskets. The next frontier is cashierless or autonomous checkout. Amazon famously pioneered “Just Walk Out” technology in its Amazon Go convenience stores and some Amazon Fresh supermarkets, where cameras and sensors allow customers to simply grab items and leave, with their account automatically charged. Traditional grocers are testing similar concepts: for instance, Kroger has piloted smart grocery carts that scan items as shoppers go, and other chains are trialing AI-powered camera systems at store exits. While Amazon recently scaled back some of its checkout-free deployments in Whole Foods, it is also licensing the technology to third parties and continuing to roll out improvements. Over time, autonomous checkout could reduce the need for large front-end checkout space, potentially freeing square footage for merchandise or other services. Beyond checkout, grocers are deploying inventory robots (to scan shelves for stock levels), electronic shelf labels, and sophisticated analytics to manage pricing and inventory in real time. Drones and sidewalk robots for grocery delivery have even been tested in certain markets (though regulatory and logistical hurdles mean those remain experimental). For real estate investors, these tech trends indicate that grocery stores are becoming more efficient and possibly capable of generating higher sales per square foot – a plus for landlords concerned about tenant health. A tech-forward grocer may also need different things from a building (e.g., stronger electricity or data infrastructure, space for servers, etc.), but overall these innovations aim to enhance the in-store experience and profitability, reinforcing the staying power of brick-and-mortar grocery. As autonomous checkout and other technologies mature, grocery real estate might see subtle shifts (perhaps stores dedicating less area to checkouts and more to fresh food or dining areas, making them even more attractive community marketplaces). In any case, the incorporation of new technology by grocery tenants demonstrates an industry that is modernizing rather than stagnating, which should give investors comfort about the longevity of their grocery-anchored assets.

Risks and Considerations in Grocery Store Real Estate

Location Dependency and Demographics: While grocery-anchored assets are generally stable, they are not risk-free. The success of a grocery store (and thus its real estate) is highly dependent on the local trade area demographics and competition. A store in a growing, affluent suburb can thrive for decades, whereas one in a declining population area or with new competition next door could see sales drop. Investors must carefully evaluate the grocery sales performance (if available) and the surrounding market conditions. Key questions include: Is the area’s population growing or shrinking? Are incomes and consumer spending power sufficient for the grocer’s format (e.g., a high-end organic market needs enough wealthy shoppers)? Who are the competing grocers in the vicinity, and is our tenant the market leader or a secondary player? Because people typically grocery shop within a few miles of home, the primary trade radius (often 3-5 miles) largely dictates a store’s potential. If a rival chain opens a brand-new store closer to the population center, it can erode our tenant’s customer base. Mitigating this risk comes down to investing in well-located properties: sites at “Main & Main” in densely populated neighborhoods or in established retail corridors are ideal. Locations with high traffic counts, good visibility, and easy access will have a competitive edge. Additionally, anchors positioned as the sole grocery store in a community (e.g., the only supermarket in a small town or the only full-service grocer in an urban neighborhood) have natural insulation – they effectively become irreplaceable infrastructure. Ultimately, prudent investors underwrite the specific location, not just the lease. They consider worst-case scenarios (if this tenant left, could we replace them with another grocer or alternative anchor?) to ensure the real estate has intrinsic value beyond the current tenant.

Tenant Financial Health and Industry Competition: The grocery industry operates on razor-thin profit margins (often 1–3%), which means grocers must run very efficient operations and achieve high sales volumes to stay profitable. This can be a risk factor if a particular chain’s strategy falters or if cost pressures (labor, food inflation, supply chain) squeeze profits. We have seen grocery chains undergo bankruptcies or store closures in the past – for example, regional grocers like A&P, Pathmark, Winn-Dixie, and others have faced financial distress historically, leading to dark stores. While current market leaders are generally healthy, investors should keep tabs on their anchor tenant’s corporate health. One red flag might be if a tenant is losing market share or facing disruptive new competition (like hard discounters entering the market, or a big box supercenter ramping up grocery sales). Another consideration is industry consolidation: a merger could result in overlapping stores in one area, prompting the company to close one location. The mooted Kroger-Albertsons merger has raised such questions – regulators may force some stores to be divested because of overlap. If your property’s store ends up on the chopping block, that’s a risk to your rental stream. On the flip side, many closures get picked up by other grocers (often a chance for a new chain to enter the market). Still, landlord and tenant interests align in wanting a busy, profitable store. Investors often mitigate tenant risk by focusing on market-dominant grocers – those with #1 or #2 market share positions that are less likely to withdraw. Additionally, some investors diversify by acquiring portfolios of grocery-anchored centers with varied tenants, so they’re not overexposed to one chain. Conducting due diligence on the tenant’s sales (if available) and corporate outlook is a critical part of evaluating grocery real estate risk.

Lease Structure and Co-Tenancy Clauses: Lease terms in grocery-anchored centers can sometimes introduce risk factors as well. One common clause to be aware of is the co-tenancy clause. Smaller tenants may have clauses that allow them to reduce rent or even terminate their lease if the grocery anchor (or other named anchor) goes dark for an extended period. This means the loss of an anchor can trigger a cascade of reduced income from remaining tenants – a nightmare scenario for owners. It’s important to review the rent roll for any co-tenancy provisions and understand the remedies. Many modern leases have tightened these clauses, but they still exist. Another consideration is that grocery anchors often negotiate exclusive rights for certain merchandise categories (for example, the grocer may prevent the landlord from leasing another space to a bakery, butcher, or other seller of grocery staple items). While not immediately risky, these restrictions can limit what tenants you can bring in to fill vacancies, potentially slowing re-leasing. As for the NNN structure itself, investors should confirm whether the grocery lease is true triple-net or if there are any landlord responsibilities retained (sometimes “NNN” anchors still have landlord responsible for roof and structure). If roof/structure are on the landlord, one must budget for capital expenditures – a roof replacement on a 50,000 SF supermarket is a significant cost, albeit infrequent. Furthermore, long lease terms mean your rental increases might be limited; if the lease has flat rent for 20 years (some older grocery leases lack bumps), the landlord could face diminishing real returns over time due to inflation. Ideally, leases have periodic rent escalations (e.g., 5-10% every 5 years or CPI-based increases) to keep pace. Finally, be mindful of lease renewal options: grocery anchors often have multiple extension options at fixed rents. If those rents are below market in the future, the tenant will certainly exercise, which is great for occupancy but means the landlord could be locked into below-market rent. In summary, carefully scrutinize lease details – knowing the fine print helps an investor assess and price the risk appropriately.

E-commerce and Changing Consumer Habits: While we highlighted that e-commerce is pushing grocers to adapt rather than threatening extinction, it is a factor to watch. Online grocery’s share of the market is expected to steadily grow in coming years (even if it remains a minority). The risk is that if a particular store or format fails to keep up with omnichannel trends, it could fall out of favor. For instance, a grocer that doesn’t offer convenient pickup or delivery might lose customers to one that does. Or a store that’s too large might become inefficient if more sales shift to delivery from centralized warehouses. Real estate investors should prefer grocery tenants that have embraced an omnichannel strategy (most majors have). Additionally, alternative food retail models – meal kit subscriptions, convenience store expansion into fresh foods, even farmers markets – create a dynamic competitive landscape. However, these are incremental, and the core weekly shopping trip remains entrenched for most households. The key is that grocery real estate must continue to evolve with the retailer and consumer. We’re already seeing stores allocate less space to canned goods (which people might order online periodically) and more to fresh produce, ready-to-eat meals, and even in-store dining experiences that can’t be replicated online. Some supermarkets now feature brew pubs, pizzerias, or coffee shops inside to enhance the in-person appeal. This adaptation is positive for landlords as it keeps the stores relevant. Yet it may require landlords to be flexible and supportive of renovations or expansions. Building structures might need updates (such as adding refrigerated locker areas for grocery pickup). An investor who is unwilling to invest in property improvements when needed could inadvertently contribute to a tenant’s decline. In short, staying attuned to retail trends and maintaining a property’s ability to meet the latest operational needs is part of managing the risk associated with e-commerce and evolving consumer habits.

Public REITs with Grocery-Anchored Portfolios: Examples and Insights

Some of the strongest endorsements of grocery-anchored real estate come from public REITs that specialize in owning these assets. These companies’ strategies and performance offer useful insights for investors considering similar properties. Below are a few notable REITs focused on grocery-anchored shopping centers (often termed “open-air” or “neighborhood” centers) and how they leverage grocery tenants for success:

Kimco Realty Corporation (NYSE: KIM) – Kimco is the largest publicly traded owner of grocery-anchored shopping centers in North America, with over 500 open-air centers. Approximately 85% of Kimco’s annual base rent comes from properties anchored by grocery or similar necessity retail. Its portfolio features major supermarket brands such as Albertsons/Safeway, Kroger, Whole Foods (Amazon), and Walmart (often in the form of Walmart Neighborhood Markets or Sam’s Clubs) as anchor tenants. Kimco’s strategy is to concentrate in dense coastal and Sun Belt markets, making it a bellwether for grocery-anchored performance. The company reports that grocery sales across its centers average around $770 per square foot, and centers with grocery anchors see recurring shopper traffic 2–3% higher than those without – evidence of the foot traffic draw. Kimco has been actively expanding via acquisitions (e.g., the RPT Realty merger) to deepen its “REIT with eats” focus. For investors, Kimco’s scale and stable occupancy (anchors at ~98% occupied) underscore how a well-curated grocery-anchored portfolio can generate consistent cash flow and growth.
Regency Centers Corporation (NASDAQ: REG) – Regency Centers is another leading shopping center REIT, owning over 400 centers nationwide, almost all of which are grocery-anchored. Regency targets affluent suburban trade areas; many of its centers are anchored by top-tier grocers like Publix, Trader Joe’s, Whole Foods, Harris Teeter, or Kroger banners. The REIT emphasizes high-quality, Class A neighborhood centers where demographics (high incomes, strong population density) support premium grocery concepts. Regency’s tenant mix often complements the grocery anchor with specialty retail and dining, creating a one-stop destination. This focus has yielded industry-leading occupancy and same-property NOI growth for Regency. Even in recent years, Regency has been able to push rents on small shops because demand for space near best-in-class grocers is high. The company’s development pipeline includes new ground-up centers anchored by grocers – for example, Regency is currently developing a Whole Foods-anchored center in Connecticut. Investors looking at Regency’s model can see the value of combining a dominant grocer with an upscale tenant lineup in supply-constrained markets: the result is a durable income stream that often outperforms broader retail benchmarks.
Brixmor Property Group (NYSE: BRX) – Brixmor owns and operates a large portfolio of approximately 380 open-air shopping centers across the U.S., with roughly 80% of its base rent derived from grocery-anchored centers. Brixmor’s strategy underlines the importance of grocery anchors – the company refers to grocery as the “cornerstone” of its portfolio. Its centers feature a who’s who of supermarket brands: Kroger (and its various subsidiaries) is Brixmor’s largest tenant by rent, and other top anchors include Publix, Albertsons, Ahold Delhaize (Stop & Shop/Giant), and Walmart. Brixmor often takes value-add approaches to its centers, upgrading anchor spaces and re-leasing vacated boxes to stronger grocers or retail uses. In recent years, Brixmor has acquired additional grocery-anchored centers (including a four-center portfolio for $211 million in late 2022) to bolster its holdings. With portfolio occupancy now in the mid-90% range and rising, Brixmor demonstrates how reinvesting in grocery-anchored assets (through redevelopment and releasing) can drive solid internal growth. For investors, Brixmor’s focus highlights that even for value-oriented strategies, grocery anchors provide a stable foundation on which to improve and build value.
Phillips Edison & Company, Inc. (NASDAQ: PECO) – Phillips Edison & Co. is a pure-play grocery-anchored shopping center REIT with a national footprint of over 300 centers. PECO’s portfolio is uniquely concentrated on necessity retail – nearly all its centers are anchored by grocery chains, ranging from national players like Kroger and Albertsons to strong regional grocers and discount chains like Dollar General Market. The company prides itself on local expertise in the communities it serves, often being the “owner of choice” for neighborhood centers. Phillips Edison’s occupancy has been exceptionally high (97–98% leased as of 2024), reflecting both the essential nature of its tenant base and active asset management. The REIT’s CEO has noted that resilient consumer spending, Sun Belt population migration, and the lack of new retail development have created tailwinds for grocery-anchored centers – trends that benefit PECO’s properties. For investors, Phillips Edison offers insight into a defensive strategy: by owning a diverse mix of grocery-anchored centers across many states, it achieves stable rental income with low volatility. Its success speaks to the broader theme that necessity-based retail real estate (with grocery at the core) can deliver reliable performance, even when other commercial real estate sectors face headwinds.
Federal Realty Investment Trust (NYSE: FRT) – Federal Realty is an established retail REIT known for high-quality mixed-use and retail properties. While FRT is not exclusively grocery-anchored, many of its shopping centers include grocery store anchors as part of a larger tenant mix. Federal’s portfolio in markets like DC, Philadelphia, and California often features premium grocers (e.g., Wegmans, Giant, Safeway) alongside other retail and even apartments or offices. The REIT’s long-term approach to holding and continually redeveloping properties has yielded an average occupancy consistently in the mid-90s. Their experience shows that grocery anchors can successfully be integrated into larger lifestyle-oriented centers and town-center projects. For example, FRT’s Pike & Rose development in Maryland includes a Harris Teeter grocery within a vibrant mixed-use neighborhood. The presence of the grocer ensures daily traffic for the project’s retailers and restaurants. Federal Realty provides a glimpse into how grocery anchors play a role even in high-end retail environments – as dependable traffic engines that complement experiential and discretionary retail. Investors can learn from FRT that location and demographics are key: they select grocery anchors that align with affluent customer bases and then craft a destination around that anchor. This reinforces the idea that a strong grocery component can elevate a retail property’s overall appeal and performance.

Across these examples, public REITs have leveraged the grocery-anchored model to deliver steady dividends and long-term growth for shareholders. They actively manage portfolios to keep anchors happy (through strategic lease extensions or property improvements) and maintain a healthy balance of shops that thrive off the grocery traffic. By examining REIT investor presentations and filings (often available on their Investor Relations pages linked above), one can see metrics like average shopping visits per week, same-center NOI growth, and leasing spreads that all speak to the grocery-anchor advantage. In summary, the collective success of Kimco, Regency, Brixmor, PECO, Federal Realty, and others illustrates that scaling a portfolio of grocery-anchored assets can be a durable and profitable real estate strategy. These companies offer a playbook for private investors: focus on strong grocery brands in good markets, keep properties well-leased and updated, and the centers can produce consistent income with potential for appreciation.

Leveraging the Brevitas Platform for Grocery Property Investments

The rise in popularity of grocery-anchored real estate has also been reflected in online marketplaces like Brevitas. Brevitas is a deal platform that connects buyers, sellers, brokers, and 1031 exchange participants, and it offers powerful search tools to find niche CRE assets – including grocery store properties. Investors interested in grocery-anchored deals can use Brevitas to efficiently screen opportunities nationwide. For example, using the search filters, you can select the “Retail – Grocery Anchored/Community Center” property subtype to narrow listings to shopping centers featuring supermarket anchors. Additional filters for location, price range, cap rate, and tenant name allow you to pinpoint assets that meet specific criteria (e.g., a Publix-anchored center in Florida with a 6% cap rate). The platform currently showcases a diverse range of grocery-focused investment listings. Recent offerings include a 59,650 SF grocery-anchored center in the Cleveland, OH area (100% occupied, anchored by Lucky’s Market) and a large Honolulu, HI shopping center anchored by a major supermarket – demonstrating the geographic breadth of opportunities available. Each Brevitas listing provides details like lease terms, tenant profiles, rent rolls, and location demographics, so investors can quickly evaluate the fundamentals discussed in this article (such as tenant quality, lease length, and local market strength).

Brevitas is particularly useful for 1031 exchange investors on a tight timeline to identify suitable replacement properties. Rather than relying on local contacts alone, buyers can tap into Brevitas’s nationwide inventory of off-market and on-market listings. The platform often features exclusive or private listings that aren’t widely advertised – for instance, a grocery-anchored center being quietly marketed by a broker seeking a targeted pool of buyers. By creating a free account, you can save searches, set up email alerts for new grocery-anchored property listings, and even directly message the listing brokers through integrated deal rooms. For sellers (brokers and owners), Brevitas provides exposure to a global network of qualified investors specifically looking for CRE assets, including those with supermarket anchors. The platform’s marketing tools allow the seller to highlight the key selling points (such as a long-term NNN lease to a national grocer, or recent sales growth at the anchor store) to attract motivated buyers.

Call to Action: If you’re considering adding a grocery store property to your portfolio or need to find a solid replacement asset for a 1031 exchange, Brevitas can streamline your search. Leverage the platform’s search filters to explore current grocery-anchored property listings and use the deal room features to review financials and due diligence documents securely. The combination of an essential asset class – grocery-anchored real estate – and a modern transaction marketplace – Brevitas – means you can source and execute on these investments faster and more effectively. Don’t miss out on the recession-resilient opportunities in the grocery sector. Sign up on Brevitas to start browsing grocery store and food market real estate deals today, and connect with brokers who specialize in this thriving niche. With the right tools and insights, you’ll be well-positioned to capitalize on the trends, enjoy stable returns, and manage the risks as you invest in grocery-anchored CRE.