Grocery Store Anchored Retail Shopping Center Investments: An Honest Outlook


Key Takeaways

Key Takeaways

  • A grocery store anchored shopping center is one where a grocery store occupies the majority of the space available for lease.  
  • The majority of grocery store anchored assets are owned by large institutional investors, namely REITs and Private Equity firms.
  • Despite malaise in the broader retail sector, the performance of grocery stores and the shopping centers they anchor has remained strong for three reasons:  necessity, adaptability, and profitability.
  • Grocery stores sell food and other items that are necessary for day to day survival.  Their enduring necessity means that they tend to thrive in all phases of the economic cycle, including pandemics.
  • The ability of grocery stores to adapt during the pandemic by offering things like curbside pickup and one way aisles has only highlighted their continuing relevance and led to a surge in sales.
  • The surge in sales has resulted in increased profitability for major grocery chains.  Along with the factors mentioned above, this makes them a safe credit risk relative to other retailers.  For this reason, investors have bid up the prices for the retail centers they anchor and we expect that this will continue to be the case for the foreseeable future.

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Grocery Store Anchored Retail Shopping Center Investments: An Honest Outlook

There is no question that the COVID-19 pandemic has had a significant impact on the performance of retailers nationwide.  But the impact has not been distributed equally.  There have been winners and losers, which were largely determined by the necessity of the retailer’s product offering.  For example, companies with offerings geared towards the home like Peloton or Home Depot have seen significant sales spikes as individuals were barred from gyms or caught up on home improvement projects.  On the other end of the spectrum, companies that sell non essential goods like clothing stores have not fared as well.

Of all of the types of retail businesses, perhaps none proved its enduring necessity more during the pandemic than grocery stores.  As a result, we feel that the outlook for investing in grocery store anchored retail centers is strong and the purpose of this article is to explain why.  Let’s start with a simple definition.

What is a Grocery Store Anchored Shopping Center?

A grocery store anchored retail shopping center is one where a grocery store leases a high percentage of the available space.  In a typical configuration, the grocer is surrounded by smaller tenants whose businesses can benefit from the traffic they generate.  A classic example is our West Market Street Station property.

In this shopping center, Whole Foods is the grocery store anchor and they lease 30,173 SF or 56% of the 54,166 SF available.  This is a popular grocer and they generate a significant amount of traffic that the supporting tenants like OrangeTheory Fitness and LuluLemon Athletica hope to convert into sales.  For example, it is incredibly convenient for an individual to drive to the center for a workout and then stop into the grocery store to pick up a few items before heading home.

Who Owns Grocery Store Anchored Shopping Centers?

Grocery store anchored shopping centers are large, expensive retail properties and they are typically only affordable for large, institutional commercial real estate investors.  Generally, these commercial real estate investors can be divided into two groups: private equity firms vs. Real Estate Investment Trusts (REITs).

A REIT is a specialized type of investment company whose ownership structure provides tax advantages for its shareholders as long as a certain percentage of the income generated is distributed as dividends.  REITs can be privately traded, or they can be publicly traded, which means that anyone can buy or sell their shares on stock exchanges.  For example, Retail Opportunity Investment Corp. (NASDAQ: ROIC) is a large publicly traded REIT who owns 88 shopping centers where grocery stores like Aldi anchor 96% of their locations.

A private equity firm is structurally different from a REIT, but their mandate is the same, to use investor money to purchase commercial real estate assets.  By definition, these shares are privately traded and commercial real estate investors must meet income and net worth hurdles before investing.  In addition, private equity firms are not required to distribute a certain percentage of their earnings as dividends.  For example, we are a private equity firm who primarily invests in grocery store anchored shopping centers.

Retail Is Struggling, But Grocery Stores Are Thriving

In recent years, traditional retail tenants have continued to lose market share as a result of the ongoing shift to e-commerce.  Then, the coronavirus pandemic hit and accelerated this shift at a pace not seen before.  This has resulted in store closures, rental price volatility, and declining occupancy across the country including places like New Jersey, NYC, Atlanta, and greater New York.  

To illustrate this point, consider the fact that many historically iconic retailers have been driven into bankruptcy by the pandemic.  They include companies like:  Brooks Brothers, Century 21, GNC, Guitar Center, J.C. Penney, J. Crew, and Lord & Taylor.  What do all of these companies have in common?  They sell non-essential commodity products (clothes, music equipment, and nutritional supplements) that can easily be ordered online and shipped directly to the consumer’s home.  In a pandemic, this is a far safer and more convenient option.  .

Contrast the experience of retailers who sell commodity products with those who sell necessities.  Necessity retailers – like grocery stores – have seen a pandemic driven surge in consumer spending, both online and in person.   According to the Brick Meets Click /Mercatus Grocery Store Shopping Survey, online grocery store sales surged 43% from March 2020 to March 2021.  Further, the curbside pickup segment saw a 12% increase while the delivery segment gained 23% and nearly 70 million households placed an average of 2.8 orders online in March 2021.

While these statistics highlight the success of grocery stores during the pandemic, they don’t necessarily tell the story of why grocery store anchored shopping centers have performed so well. 

Why Are Grocery Store Anchored Shopping Centers Doing So Well?

There are three reasons that grocery store anchored shopping centers have continued to thrive despite the challenging economic conditions presented by the pandemic:  necessity, adaptability, and profitability.


This is the most obvious explanation for grocery store anchored retail success.  We all need to eat and grocery stores are where food is purchased.  This was the case before the pandemic, during the pandemic, and it will be the case long after the pandemic is in our rearview mirror.

The enduring necessity of food items means that there will always be a need for grocery store anchored shopping centers, even if the shopping experience looks somewhat different.


In the short-term, grocery stores were quick to adapt to meet their customers needs.  Changes include things like: curbside pickup options, home delivery, one-way aisles, sanitized shopping carts, and special shopping times for vulnerable residents.  These changes allowed customers to feel safe enough to continue shopping both in person and online.

Again, the ability of grocery store tenants to adapt proves their enduring necessity in both good times and bad.  Investors have recognized this and continue to bid up the prices of grocery anchored retail centers as a result. 


Perhaps the main reason that grocery store anchored shopping centers are doing so well is that grocery stores themselves are doing very well.  The necessity of their offering and their ability to adapt has driven a surge in sales that has left many grocery store tenants in a strong financial position.  This means that there is a reduced risk that a grocery tenant will default on their lease obligations.  

To illustrate this point, consider the performance of grocery stores over the previous year of the pandemic.  For example sales at Kroger surged nearly $10B from January 2020 to January 2021 and sales at Costco grew by $12B over the same time frame.  Similar results were seen with privately held stores like Publix, Aldi, and Trader Joes.  This type of success highlights the idea that grocery stores are more important than ever.

So, What is The Future of Grocery Store Anchored Shopping Center Investment?

Despite the ongoing disruption in the broader retail industry, we believe that the outlook for grocery store anchored retail shopping centers is bright.  This is the core of our investment business and we believe that well located shopping centers with high quality anchor tenants and supporting tenants with an experiential offering will continue to thrive in the market conditions produced by all phases of the economic cycle.

Interested In Learning More?

First National Realty Partners is one of the country’s leading private equity commercial real estate investment firms. With an intentional focus on finding world-class, multi-tenanted assets well below intrinsic value, we seek to create superior long-term, risk-adjusted returns for our investors while creating strong economic assets for the communities we invest in.

To learn more about our investment opportunities, contact us at (800) 605-4966 or for more information.

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