Top grocery chains buying up shopping centers

Demand among investors for grocery-anchored shopping centers is high, and grocery chains are buying up many of the centers in what may be both a defensive and cost-saving move, according to a story last week on retailtrafficmag.com.

The defensive purchase by a grocery chain limits the uncertainty that a new shopping center owner brings. At the same time, it can be an effective cost saving move. Kroger, which owns 45 percent of the 2,435 stores it operates, says it saves $1 per square foot per year by owning its stores versus leasing them.

Overall, the biggest grocery chains in the U.S. have invested about $450 million in grocery-anchored shopping center purchases in the last two years. Publix has led the way. The company, which operates 1,058 stores in the Southeast, spent $187.2 million to purchase 17 centers, making it one of the top 10 most active buyers of grocery-anchored centers.

Ahold (Giant, Stop & Shop) also purchased 17 centers during this time period, spending $118.4 million. Kroger has spent $61.7 million for nine shopping centers, and Wal-Mart has purchased four centers for $24.8 million.

According to the story, in many cases the grocery chains are taking advantage of "right of first refusal" clauses that allow them to match other buyer's offers, rather than having to outbid them.

Cap rates for grocery-anchored centers in low 6% range

A recent story on RetailTrafficMag.com stated that "with scores of institutional buyers looking for quality assets in primary markets, competition for class A centers is fierce and top-tier grocery-anchored shopping centers are now trading at cap rates in the low 6 percent range, while cap rates for core malls have sometimes dipped below 5 percent," according to a managing director with Jones Lang LaSalle in Chicago.

On the other hand, the story reports that momentum for sales of class B and C retail properties hasn't taken off, as some of these properties continue to suffer from retailer bankruptcies and store closings.

Here's the full story: RetailTrafficMag
 

Regency Chairman says grocery-anchored centers fared well in the recession

Martin "Hap" Stein, Jr., chairman and CEO of Regency Centers, recently said the company's grocery-anchored shopping centers held up well during the recession and helped it weather the storm. "People have to eat," he said, before adding that supermarkets at Regency Centers average over $25 million in sales.

Stein said Regency's 92 percent occupancy rate during the recession was a testament to the benefits of grocery-anchored shopping centers, and that the rate is moving back up to 93 percent. He remains optimistic about the demand for shopping center space.

According to Stein, Regency is selling shopping centers that don't have supermarket anchors with sales in excess of $25 million, and is actively pursuing centers with strong grocery anchors.