by Food Trade News Team
The rising popularity of grocery-anchored real estate is one of the 2025 trends that we have seen grow over the past few years. This year has seen some aggressive investments in the space by Blackstone, Nuveen and others.
Grocery-anchored real estate; once seen as less attractive than other commercial retail investments, is growing again in popularity as defensive and economically resistant.
This resiliency during periods of consumers’ reduced discretionary spending is what is attracting Wall Street investors back to the space. As new retail construction slowed, attention has turned back to grocery because of its high occupancy levels and supporting rental growth.
Commercial real estate giant Blackstone (NYSE: BX) has been making multiple moves in the space this year. Recently they announced a deal to take grocery-anchored real estate and essential industrial landlord Alexander & Baldwin private. This is Hawaii’s largest collection of grocery-anchored real estate. The deal is expected to close early next year.
This comes on the heels of their $440M investment in a portfolio of 2 million square feet in Dallas, Houston, and San Antonio. The majority of these properties are anchored by familiar grocery chains like H-E-B and Kroger.
And it comes following their $4bn take-private acquisition of Retail Opportunity Investments Corp (ROIC) earlier this year. ROIC specialized in the acquisition, ownership and management of grocery-anchored shopping centers located in densely-populated, metropolitan markets across the West Coast.
Adam Leslie, managing director at Blackstone Real Estate, said: “Grocery-anchored retail is one of our high-conviction themes given the strong fundamentals across the sector.” High conviction indeed. But, it’s not just Blackrock that sees this as a smart move.
Earlier this year Nuveen announced it had raised $320M in new institutional investment capital to its U.S. Cities Retail Fund. Katie Grissom, the head of retail & mixed-use at Nuveen, remarked that it is “a great vintage moment for the sector” when talking about the current retail market. Launched in 2018, the fund has targeted grocery-anchored retail properties across U.S. markets with an emphasis on where consumers both live and work.
In an economic environment beset by the uncertainties of AI and U.S. tariff disruptions, investors aren’t exactly fleeing to safety, but adding these holdings as defensive measures. When viewed with an eye towards capitalization rate – a key metric in real estate that shows a property’s annual return – these investments deliver.
A higher cap rate means higher returns, but more risk to your investment. Lower cap rates implies greater stability and safety, but lower returns as well. Investor Andy Weiner; Founder and President of RockStep Capital, explained it this way:
“The typical returns for grocery-anchored centers (for high-end groceries, for Trader Joe’s, for Whole Foods, for H-E-B type of centers) are five to six cap. For non-prime type retailers, it’s a six- or seven-figure cap. And then for some of the independent grocery stores, it’s a seven-to-eight-and-a-half-cap. In other words, the more premium and reliable the tenant, the lower the cap rate, and the higher the valuation.”
Grocery-anchored retail had a record setting 2021 and 2022 coming out of Covid. Across the board spreads representing the perceived risk factors these investments have shrunk, representing the perceived safety of these investments.
If the uncertainties of the economy persist, the defensive nature of grocery-anchored retail may represent an opportunity for retailers to evaluate their property strategy.
