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U.S. grocery store openings increased 30% in 2018

More than 17 million square feet of new grocery stores opened

Michael Browne, Executive Editor

March 27, 2019

2 Min Read
Bridge_Street_Market1000.png
Among new retail concepts introduced last year was Meijer's Bridge Street Market.Meijer

New grocery store openings were up 30% in 2018, with more than 17 million square feet of space added in the United States, according to JLL’s Grocery Tracker 2019 report. More than one-quarter of the new stores were in Florida, California and Texas due to expansion by their respective local market-leading grocers: Publix, Sprouts Farmers Market, Aldi, Kroger and H-E-B.

“Grocery is one of the strongest retail sectors, with nearly twice as many new stores opening than closing last year,” said James Cook, director of retail research at JLL. “The grocery sector has seen shopper habits shift to more frequent, shorter trips, versus large weekly hauls. As a result, grocers are focusing on developing smaller-format stores, those under 10,000 square feet, with more local offerings to appeal to the surrounding community.”

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Cook added, “In 2019, we expect to see even more grocery stores rolling out their smaller-format stores as they battle razor-thin margins in prime locations, while still serving evolving consumer needs.”

Already executing this tactic is small-format grocer Aldi, which opened 82 stores last year, that accounted for nearly 16% of the total new stores by square footage. Sprouts continued at a fast pace, adding 30 stores with another 30 planned this year.

Among new smaller-format concepts introduced are Giant Foods’ 9,500-square-foot Giant Heirloom Market in Philadelphia, the 10,000-square-foot Hy-Vee Fast & Fresh and Meijer’s Bridge Street Market (picture above), which operates at about 37,000 square feet, significantly smaller than a typical 200,000-square-foot Meijer store.

“Disruption in the grocery sector proved that even a needs-based retailer needs to evolve with consumers’ changing shopping habits,” he said. “Major chains such as Walmart, Kroger and Giant Foods are all making investments in areas that aim to provide their customers with a flexible and reliable shopping experience that best suits their individual preferences.”

Beyond store openings, in 2018 investment in grocery real estate totaled $9.9 billion — grocery cap rates saw some softening at the end of 2018, increasing 11 basis points from 2017. While single-asset grocery transactions have declined 5.8% since 2016, the average price per square foot has increased by 7.8% across the United States — in primary markets the average price for square foot has increased by nearly 10% (9.5%) over the past two years.

“While grocery investment saw a decrease in 2018, that may be due in part to stricter underwriting standards and lack of Trophy and Class A grocery-anchored deals on the market last year,” added Chris Angelone, retail capital markets lead, JLL. “However, we expect an uptick in premium grocery locations to go on the market in 2019 as REITs and institutional investors continue to dispose some of their smaller neighborhood and community centers.”

Read more about:

Sprouts Farmers Market

About the Author

Michael Browne

Executive Editor, Supermarket News

Michael Browne joined Supermarket News in 2018 after serving in managing and executive editor capacities at leading B2B media brands including Convenience Store NewsLicense Global and Travel Agent. He also previously served as content production manager for print and digital in the Business Intelligence division of Informa, parent company of Supermarket News and Nation’s Restaurant News.

As executive editor, Mike oversees the editorial content of supermarketnews.com as well as the monthly print publication. He also directs all content-based brand-related projects including the annual Top 75 Retailers report, Category Guide, Retailer of the Year, research surveys and special reports, as well as podcast and webinar content. Mike has also presented and moderated at industry events.

In addition to the positions mentioned above, Mike has also worked as a writer and/or editor for special projects at American Legal Media (ALM), managing editor for Tobacco International, special projects editor at American Banker • Bond Buyer, and as production editor for Bank Technology News and other related financial magazines and journals published by Faulkner & Gray.

A graduate of Fordham University, Mike is based in New York City, where he was born and raised.

Contact Mike at [email protected] or follow him on Twitter and LinkedIn.

 

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