Supermarket chains, flush with cash, are leading the retail industry in adopting technology and in opening stores. As an essential business sector that played a critical role in ensuring food supply during a time of great uncertainty, grocery retailers were among the biggest retail success stories of the pandemic. The U.S. grocery sector grew by 9.4% in 2020 and sustained that growth in 2021; total grocery sales reached $803 billion, representing a nearly 16% increase over pre-pandemic levels, according to JLL’s Grocery Tracker 2022 report.

Aldi continues to lead the pack. The German supermarket chain opened 88 stores in 2021, totaling 2.2 million square feet. It plans to open about 150 stores by the end of 2022, which would give it 2,158 and make it the third-largest grocery retailer in the U.S. by store count, behind Kroger and Walmart.

Other grocers in heavy expansion mode in 2021 include Publix, which added 1.3 million square feet in Florida, and Grocery Outlet, which opened just shy of 900,000 square feet concentrated on the West Coast. Food Lion, a subsidiary of Ahold Delhaize, also expanded its store count considerably, the bulk via the acquisition of 71 stores from Southeastern Grocers.

Smaller-format stores showed significant expansion in 2021, as well. In addition to Aldi, whose locations tend to average around 25,000 square feet, new stores came from Lidl, whose stores average 15,000, and Sprouts Farmers Market, whose units average 25,000. Lidl has opened 52 stores since August 2020 to bring its count to 167. Sprouts added 20 U.S. locations.

Meanwhile, Kroger is reinvesting in its fulfillment operations. The retailer opened two new high-tech automated fulfillment centers, in Ohio and Florida, last year.

To sustain the growth, supermarkets need to boost the experiences at their physical stores as consumers venture out post-pandemic, according to JLL. Supermarket chains will continue to innovate with technologies like the Just Walk Out cashier-free system Amazon developed for its grocery stores and licensed to other retailers. “The grocery sector in the year ahead will be one to watch as we expect increased competition from foreign grocery chains and restaurants, which will spur many grocers to invest in major in-store technology advancements,” said JLL Americas retail advisory services president Naveen Jaggi. “Grocery stores will be changing the way consumers shop and interact with products.”

Service Tenants Led the Return to Physical Space

Grocers may be leading the charge, but they’re not the only companies expanding into new real estate. U.S. businesses have more physical locations now than they did before the pandemic. Companies shut down offices, stores and warehouses in the first year of the pandemic, but by the third quarter of 2021, the number of physical business locations had soared to 7% above the pre-COVID level, according to the Economic Innovation Group. The services industry largely led the increase in physical locations. One reason businesses bounced back significantly quicker than after the Great Recession: a larger federal government stimulus package aimed at keeping businesses afloat.