This retail property type typically offers a variety of convenience-oriented co-tenants including pharmacies, dry cleaners, health clubs, medical offices, banks, restaurants, and others that serve the daily needs of nearby residents.
While online grocery services are gaining popularity among consumers and supermarket chains, they are not viewed as a severe threat to grocery-anchored centers, according to Retail Capital Markets. In fact, among commercial real estate investors surveyed by RCM, 48% cited anchored shopping centers, particularly supermarket-anchored properties, as the most preferred retail investment. Grocery-anchored shopping centers are frequented two to three times a week and bring a constant flow of traffic that benefits in-line tenants. It’s the primary reason many retailers choose to locate in this property type.
In a recent review of grocery-anchored shopping centers within Eastern Massachusetts/Greater Boston, Southern New Hampshire, and Greater Hartford, CT - the regional coverage within our proprietary GRIIDTM database - we took a look at vacancy rates in these centers by grocery chain. For this purpose we defined a shopping center as a retail property with three or more tenants. We also included only grocery anchors that averaged 40,000 square feet or more.
Combining all three regions, there are 277 grocery-anchored shopping centers that fit the criteria noted above. The average center size is 164,200 square feet, while the average vacancy rate within these properties is 7.2%, significantly below the 9.8% vacancy rate of all properties throughout the entire KeyPoint Partners’ GRIIDTM coverage area. The average supermarket size within the selected group of 277 shopping centers is 58,000 square feet.
But are all grocery-anchored shopping centers created equal? When it comes to vacancy by grocery anchor, there really aren’t too many surprises.
The lowest vacancy rate among grocery-anchored shopping centers goes to centers anchored by Wegmans. The selective store location strategy throughout Eastern Massachusetts and the high demand for available space results in a meager 3.2% vacancy rate at Wegmans-anchored shopping centers. Six other chains anchor shopping centers whose vacancy rates are below the overall 7.2% average. These include Shop Rite, Big Y, Price Chopper, Stop & Shop/Hannaford, Star Market, and Whole Foods.
The highest vacancy rate among grocery-anchored shopping centers falls to Roche Bros. shopping centers, which have a vacancy rate of 12.7%. Skewing the rate, however, was the impact Northborough Crossing and other new development along Route 9 appears to have had on Roche Bros.’ Bay State Commons location in Westborough, where vacancy is prevalent, including a former Stein Mart store. Discounting this shopping center, Roche Bros.- anchored centers would have a meager 4.2% vacancy rate. Other chains coming in higher than average are Market Basket, Shaw’s, and Price Rite.
The following table shows the breakdown of shopping center vacancy by supermarket anchors (CLICK on image to enlarge):
By no means should property vacancy rate be a sole determinant in measuring the strength or attractiveness of a shopping center, but it’s certainly a factor that should be given serious consideration before deciding to locate or invest in a retail property. Nevertheless, relative to other shopping center types, grocery-anchored centers have a strong position in the retail market for retail prospects and investors alike.
VP of Research