Friday, September 7, 2012

Whole Foods growth is good for REITS

An article on SeekingAlpha.com last week described how Whole Foods' growth is helping its landlords, which often are major U.S. shopping center REITs. The story cited research that says supermarket industry revenue will grow an estimated 0.4 percent this year, while Whole Foods sales may rise as much as 16 percent.

With shopping center construction at extremely low levels, the companies that own the top shopping centers in a market face little to no competition from new construction. And it's the REITs - like Kimco, with 12 Whole Foods stores in its portfolio - that often have the top supermarkets and therefore benefit the most.

It doesn't take a rocket scientist to figure this one out. Whole Foods is successful and growing, and the real estate it occupies is typically high end and valuable, and likely to be owned by a large REIT. In the Greater Philadelphia Region, Wegmans can be put in the same category. Lease to a store that people love, and your center will do well. (But you already knew that.)

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