Investment appetite for grocery-anchored retail remains robust

Investment appetite for grocery, one of retail’s most resilient sectors, continues to remain robust. In 2024, despite persistent capital market challenges, investment in grocery-anchored retail properties surpassed 2023 levels. This growth was primarily fueled by a robust second half of the year, coinciding with a 100 basis points of cuts in benchmark interest rates. By the end of 2024, multi-tenant, grocery-anchored retail transactions totaled $7.0 billion, representing a 1.4% increase from the previous year. The second half of 2024 saw a particularly significant uptick, with transaction volume rising by 34%.

The rising average price per square foot sold over time further demonstrates the growing investment appeal of grocery-anchored retail properties. Several factors have contributed to this upward price pressure, including strong sector performance, diverse tenant mix, durable demand due to high foot traffic, and limited supply of high-quality products. In 2024, the average price per square foot reached a record high of $209.

Looking ahead to 2025, increased investor demand for grocery-anchored retail, coupled with greater clarity in the debt market, is expected to support continued investment activity in the coming years.

Grocery’s investor landscape remains diverse

The multi-tenant grocery retail investment landscape in 2024 exhibited greater diversification among investor types. Private capital's share of the total investment volume in this sector decreased from 74% in 2023 to 68% in 2024, primarily due to increased participation from other investor types, notably REITs and operators. Several REITs, including Brixmor, Phillips Edison & Co, Cohen & Steers, ShopOne, Agree Realty Corporation, and Regency Centers, have become increasingly active in response to strong consumer demand in the sector.

Concurrently, grocers themselves have emerged as significant investors, motivated by a diversification of revenue streams and increased role in optimizing synergies between businesses within retail centers. Operators such as Publix, Trader Joe's, Walmart, H Mart, and Weis Markets have substantially increased their investment activity, with this investor segment’s total investment volume reaching an eight-year high.

The fragmentation of multi-tenant grocery retail investment in 2024 underscores increased investor confidence in the sector, with REITs and grocery operators expected to continue taking on more prominent roles alongside traditional private capital investors.