Grocery-anchored centers may have the highest vacancy rates in retail real estate, but their rents continue to rise.
Last week during the RECon show in Las Vegas, global real estate services firm JLL issued a report showing that grocery-anchored neighborhood centers—despite acting as retail’s essential core during the height of the pandemic—had vacancy rates averaging 7.4% in the second quarter. That was higher than the mall sector’s 7.2% rate.
Yet the vacancy rate is not solely indicative of the health of neighborhood centers, whose rents rose by 3% during the quarter, just a shade behind the 3.1% rent increases at strip centers. Investors have been highly active in acquiring grocery-anchored centers this year, and operating companies with huge portfolios of the properties like Phillips Edison & Company and InvenTrust have been in sell mode due to the high prices they command.
“Demand for grocery-anchored investments is the strongest we’ve seen in nearly two decades,” said Jim Hamilton, a JLL senior managing director who this week closed a $16.2 million deal for a Kroger-anchored center in Atlanta. “We’ve seen many investors shift their strategy to retail investments, with grocery-anchored being the most highly sought after.”
JLL served as the broker for First National Realty Partners’ acquisition of Crossroads South, a 201,404-sq.-ft. Kroger-anchored center whose other tenants include Planet Fitness, Backcock Furniture, Shoe Show, and Subway.
The property is situated on 23 acres in at the intersection of Tara Boulevard and Highway 138, which is traversed by approximately 81,000 vehicles per day.