Mobs of investors are fighting over properties anchored by big supermarket chains such as Harris Teeter, Kroger and Publix, leading those seeking less competition to focus on shopping centers anchored by specialty grocers, such as Earth Fare, Sprouts Farmers Market, The Fresh Market,Trader Joe’s and Whole Foods. According to Franklin Street Retail Investment Advisors, 51 specialty-grocery-anchored U.S. shopping centers have traded hands in the past two years, accounting for an aggregate $1.3 billion, double the amount sold in 2012.
About 80 percent of last year’s specialty-grocery-anchored properties were single-asset deals, according to Gary Saykaly, senior director at Franklin Street. Of the 10 transactions that were part of a larger portfolio sale, most consisted of entity-level transactions or the buyout of a partnership interest. Fresh Market was the most popular specialty supermarket among traded properties last year, accounting for 37 percent of the total, Saykaly reports. Whole Foods made up 28 percent of the deals, Trader Joe’s 22 percent, Earth Fare 12 percent and Sprouts 2 percent. Whole Foods properties garnered the lowest cap rates: at 4.9 to 5.4 percent.
In regional terms, the Southeast was the hot zone, as 66 percent of the total sales volume last year occurred in Florida and North Carolina, according to Franklin Street. Georgia was the third most active state, with 22 percent of the total. The majority of sellers were developers and private investment groups, among them Och-Ziff Capital Management Group and Rialto Capital Management.
Specialty grocers are helping to drive a new wave of ground-up development as well, since they are growing much faster than their traditional supermarket peers, according to Franklin Street. Whole Foods has 15 new stores under way, followed by Fresh Market, which is planning to open 10. Meanwhile, Earth Fare, Sprouts and Trader Joe’s have collectively announced 22 stores set to open this year. All these are to roll out in the Southeast, 17 of them opening in Florida. Only eight are redevelopments, Saykaly says. The majority of the developers involved are privately owned.
