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JLL says healthy food, affordable pricing, private labels and digital integrations drive grocery store performance
CHICAGO, Feb. 26, 2018 – Grocery-anchored centers continued to be an attractive property type for investors in 2017, with sales volumes increasing by 5.3 percent. The asset class remained stable amid a period of low retail transaction volumes. But after grocery store expansions went bananas in 2016, the industry took a minute to digest in 2017. Openings of new grocery stores reached 13.4 million square feet of space, which is a decrease of 28.8 percent year-over-year, according to
JLL's Grocery Tracker 2018 report.
"It's not surprising that overall grocery store expansions fell in 2017, when compared to the boom in 2016. The largest grocery chains are feeling pressure from specialty grocers, discount grocers and wholesale clubs. But we are seeing strong local chains competing head to head, and winning. Locations within the trade area and in the right markets is key. More than one-third of new store openings were in just three states: California with 1.6 million-square-feet, and North Carolina and Virginia with growth of 2.7 million-square-feet across both states. Retail follows rooftops, so the states with strong population growth will continue to see an influx of grocers," said James Cook, Director of Retail Research, JLL.
Grocers that had strong performance showed an appetite for three main experience drivers:
While grocers are taking a break on new store openings, investors' hunger for grocery-anchored shopping centers isn't satiated yet. JLL's Retail Investment Sales leader, Chris Angelone shared that it's increasingly more difficult to make a general statement about the sector. "Owning a property anchored by one of the top grocery chains is no longer a guarantee of strong performance. Investors are now looking to hedge risk by finding pockets of geographic safety for their acquisitions. Owning retail is like owning an operating business, and investors need to keep in mind changing consumer preferences," Angelone added.
"The grocery sector in the year ahead will be an eventful one. We expect increased competition from foreign chains and non-grocer domestic companies entering the space, which will spur major advancements in technology. Grocers will be changing the way consumers shop, interact with their brand and products," said Taylor Coyne, Senior Retail Research Analyst, JLL.
Trends to watch in 2018
For more insights on how these trends impacted the grocery sector in 2017, download
JLL's Grocery Tracker 2018 report.
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JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. A Fortune 500 company, JLL helps real estate owners, occupiers and investors achieve their business ambitions. In 2017, JLL had revenue of $7.9 billion and fee revenue of $6.7 billion; managed 4.6 billion square feet, or 423 million square meters; and completed investment sales, acquisitions and finance transactions of approximately $170 billion. At the end of 2017, JLL had nearly 300 corporate offices, operations in over 80 countries and a global workforce of 82,000. As of December 31, 2017, LaSalle had $58.1 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com.
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