Grocery store openings increased 30 percent in 2018

New grocery store openings were up 30% in 2018 as compared to the prior year, according to a report by JLL. More than one-quarter of the new stores were in Florida, California and Texas as a result of expansion by Publix, Sprouts Farmers Market, Aldi, Kroger and H-E-B.

"Grocery is one of the strongest retail sectors, with nearly twice as many new stores opening than closing last year," according to JLL Director of Research James Cook.

Cook also pointed out that shopper habits have shifted to more frequent, shorter trips, and as a result, food retailers are focusing on developing smaller format stores.

"In 2019 we expect to see even more grocery stores rolling out their smaller-format stores as they battle razor-thin margins in prime locations, while still serving evolving consumer needs," said Cook.

Aldi, which accounted for 16% of total new stores by square footage, continues to expand at a rapid pace. And new formats, like Giant's 9,500 square foot Heirloom Market in Philadelphia, were recently introduced.

Grocery store openings fell sharply in 2017

According to an annual "Grocery Tracker" report from JLL, grocery store openings dropped 28.8% in 2017 compared to the previous year. The report states that the decline reflects chains' efforts to reexamine their current footprints and rethink strategies to deal with new online and brick-and-mortar competition.

JLL said that California led the way in 2017 with 1.6 million square feet of new grocery store space. Virginia and North Carolina combined for 2.7 million square feet of new space, and Texas was described as "still one of the hottest states for grocery expansion."

Sprouts, Grocery Outlet, Aldi and Lidl were mentioned as notable chains that are expanding.

JLL's report said that investment in grocery-anchored centers grew 5.3% in 2017, and the company expects supermarkets to retain high interest as anchor tenants for shopping centers.

"It (grocery-anchored centers) was one of the only retail sectors to see growth in a year of low transaction volume," the study said. "Grocery-anchored centers remain a safe bet for investors, as overall transaction volume for retail has been down, indicating the asset remains a stable sector."

The study mentioned that the increase in smaller footprint stores is a clear trend - for more compact formats like Aldi and Trader Joe's, as well as for traditional supermarket chains and mass merchants like Walmart and Target.

"The grocers that can deliver the right in-store experience, combined with the right online pickup or fulfillment plan... are the ones that will thrive, whether their stores are 15,000 square feet with limited products or take up a footprint four times as large," said James Cook, JLL director of retail research.