The market for grocery stores remains strong. About $14.7 billion worth of grocery-anchored retail properties traded in 2022, an increase of nearly 16% over 2021, according to JLL. And the trend continues in 2023, thanks in part to the strong rent growth reported by owners of grocery-anchored properties.

Cash-rich buyers have the upper hand, as sellers have fewer offers now that interest rates have climbed and lenders have become more discriminating. Well-funded investors anticipate an active acquisition environment this year. “Our acquisitions are performing very well, and our pipeline continues to grow,” said Phillips Edison chairman and CEO Jeffrey Edison. “We closed on an asset in January with more under contract and in negotiation. We observed the market power shifting to the buyer.”

Phillips Edison is shopping for grocery-anchored centers in suburban markets where it projects it can achieve at least a 9% return on investment. “We are conservatively guiding to $200 million to $300 million in net acquisition this year with the capability and the leverage capacity to acquire more if attractive opportunities materialize,” he said. “We are finding those opportunities today.”

Meanwhile, new lease rates at the company’s 271 properties rose by 32.2% in 2022 and lease renewal rates  by 14.6%.

Cashing In

Mall owner PREIT has been raising funds by selling off parcels at its prime properties for redevelopment and took advantage of demand via a $27 million deal to sell to REIT Agree Realty a 65,155-square-foot parcel leased to Whole Foods at Pennsylvania’s Plymouth Meeting Mall. It’s an unusual arrangement: two REITs operating chunks of the same retail property. Whole Foods opened the store in 2010 and has a long-term lease on the property. PREIT will continue to own the rest of the 948,000-square-foot mall.

Breaking Up an Empire

10 Recent Grocery-Anchored Property Sales

Tucson, Arizona: First Washington Realty sold the 107,508-square-foot, Whole Foods-anchored River Center to a private investor for $31.1 million. Other tenants include Orangetheory Fitness, Tenet Healthcare and Childtime Learning Centers. The property was 100% leased at the time of the sale.

Long Beach, California: A partnership managed and represented by Milan Capital Management acquired El Dorado Shopping Center from DPI for $21.2 million. Grocery Outlet and Dollar Tree anchor the 74,500-square-foot center. Hanley Investment Group Real Estate Advisors represented the seller.

North Hollywood, California: Gerrity paid Kennedy Wilson $575 million for Victory Plaza, a 136,580-square-foot center anchored by Vallarta Supermarkets.

Lutz, Florida: Fairway Investments purchased Livingston Marketplace, a 64,441-square-foot, Publix-anchored center north of Tampa. Other tenants at the center, which was completed in 2022 and was fully leased at the time of sale, include Heartland Dental, Papa Johns, Prime Barber and 40 Thieves Irish pub. Franklin Street represented the sellers, Dunphy Development and BCDC.

St. Augustine, Florida: The 52,070-square-foot Parkway Village at St. Johns sold for $24.1 million. Stiles and Cantrell & Morgan developed and sold the center, which is anchored by a 35,413-square-foot Publix. Other tenants include Supercuts, Orangetheory Fitness and The Loop.

Batavia, Illinois: Kimco Realty sold the 274,282-square-foot Wind Point Shopping Center to PMAT for $20.5 million. Built in 1999, the center was 72.5% occupied at the time of sale. Aldi and Hobby Lobby anchor the property. Other tenants include Kohl’s, OfficeMax, Petland, Chili’s, Mattress Firm, AT&T and Swordfish sushi.

Vineland, New Jersey: The 138,445-square-foot, Acme-anchored Maintree Shopping Center sold for $19.3 million. Other tenants include Boston Market, Burger King, Pizza Hut, Sino Wok and PrimoHoagies. Marcus & Millichap represented the seller, an LLC, as well as the buyer, a private investor.

Albemarle, North Carolina: First Street Station — a 52,230-square-foot, grocery-anchored center — sold for $2.2 million. The property is 91% occupied by tenants like Harris Teeter, Roma Pizza and Napa auto parts. SRS Real Estate Partners represented the seller, a private investor. The buyer was a 1031 exchange investor.

Columbus, Ohio: An institutional investor purchased the 115,777-square-foot Walnut Creek Plaza for $24 million. An 86,608-square-foot Giant Eagle grocery store anchors the center, which features 13 additional retail and healthcare tenants. JRW Realty represented the buyer, and CBRE represented the seller.

What Demolition of Obsolete Space Did for the Mall Sector in 2022

Wrecking balls are swinging at struggling retail properties, and that’s a good thing for the industry. The retail property landscape is under-demolished rather than overstored, industry players often say. But that’s changing as owners convert and demolish obsolete space to make way for more in-demand uses.

Mall owners have made particularly notable progress, according to JLL’s latest tally. Mall vacancy declined by 10 basis points from the third to the fourth quarter, aided by the demolition of 1.2 million square feet of mall space in the fourth quarter. That’s the most since the first quarter of 2021, according to JLL. Owners demolished about 2 million square feet of mall space for the whole year.

5 Mall Demolitions Making Way for New Projects

Phoenix: The former Metrocenter mall will be the site of an $850 million walkable village with 2,600 multifamily units and 150,000 square feet of commercial and retail space.

Gaithersburg, Maryland: Lakeforest Mall will be demolished to make way for residential and commercial uses, green space, a transit center and an outdoor entertainment district.

Ann Arbor, Michigan: City leaders are considering a proposal to demolish the former Sears at Briarwood Mall to make way for a grocery store, a two-level retail building, an outlot building and an approximately four-level, multifamily residential building.

Springdale, Ohio: Tri-County Mall is being replaced with a mixed-use development called Artisan Village.

5 Retailers Making Headlines

Department store chain Boscov’s will open this fall in Clarksburg, West Virginia at Cafaro’s Meadowbrook Mall. The 151,000-square-foot space will be the company’s 50th store. The landlord converted the mall’s former Sears and 12 additional shops to accommodate Boscov’s.

Tuesday Morning is filing for Chapter 11 bankruptcy protection for the second time since the onset of the pandemic. It plans to close 265 of its 490 stores. The announcement comes on the heels of a similar filing by the owner of Party City. Party City plans to close 20 of its 750 stores.

Walmart no longer needs stores focused solely on e-commerce because it has added pickup and delivery operations to thousands of full-service locations in the past 10 years. Thus, the retailer is closing a pair of stores — in Bentonville, Arkansas, and Lincolnwood, Illinois — that offered only pickup and delivery service.

Acadia Promotes 2 to C-Suite

Acadia Realty Trust promoted Jason Blacksberg to executive vice president and chief legal officer. He manages the REIT’s legal and governance matters; oversees the environmental, social and governance program; and serves as corporate secretary for the board of trustees. He joined Acadia as senior vice president and general counsel in 2014. Acadia also promoted Reggie Livingston to senior vice president and chief investment officer. Livingston joined Acadia in 2011, became senior vice president and co-head of acquisitions in 2020 and assumed sole oversight of the acquisitions team in 2022.