ATLANTA—Specialty grocers are making a big impact on the commercial real estate market. How big? Bryan Belk, director of Franklin Street, discussed these realities in part one of our exclusive interview.
In this installment, he takes a deeper dive. Belk discusses the hottest markets in the Southeast for specialty grocer expansion, as well as the largest challenges for developers in this space and how sales trends will lean in the quarters ahead.
GlobeSt.com: What are the hottest markets in the Southeast for specialty grocer expansion?
Belk: Like most development in this market, we are seeing the expansion in the core markets like Atlanta, Charlotte, and Miami, but we are starting to see expansion into the secondary markets. Whole Foods and Sprouts are starting to open several locations in Alabama, for example.
GlobeSt.com: What are the biggest challenges for developers in this space?
Belk: The biggest struggle developers are having is finding the right piece of land. Retail developers cannot afford the intown land costs, which is morphing a lot of traditional retail developers into mixed-use developers. This is causing a lot of retail developers to create a joint venture with an apartment group to bring in the apartment component to development sites to make the numbers work.
GlobeSt.com: How do you see sales trends leaning going forward?
Belk: Most of these tenants have garnered more attention than traditional grocers and we are feeling that in the cap rates we are seeing for the specialty grocers. Whole Foods and Trader Joe’s deals trade at the lowest cap rates in the low to mid-5% range, followed by Sprouts deals in the upper 5%range. With the very high sales per square foot, these tenants generate investors are fighting over the stable cash flow these anchors generate.