With more cash-strapped consumers going back to shopping for basics, the neighborhood shopping center is gaining ground over chi-chi lifestyle centers and suburban malls.
This gives real-estate investment trusts investing in grocery store-anchored strip malls with a competitive edge in the broader retail real-estate investment trust universe, rattled by rising vacancy rates and retailer bankruptcies.
“I think we’re somewhat in a unique position,” said Leo Ullman, chief executive of real-estate investment trust Cedar Shopping Centers Inc. Ullman noted that, while his company has some of its smaller stores on credit watch, its properties still enjoy a 96- percent occupancy rate.
Cedar Shopping Centers owns 120 properties primarily in the Northeast and mid-Atlantic regions. Supermarkets and drugstores represent more than 75 percent of the anchors in Cedar’s portfolio, including Giant Foods and Stop &Shop, which are units of Ahold NV.
“So far, we haven’t experienced anything in the way of store closings that is substantially greater than we have normally experienced in the past. Although, I think we may see some more in the future,” Ullman said.
By offering consumers their must-haves — including food staples and other services such as dry cleaning and inexpensive eateries — strip malls anchored by grocery-store chains are better-positioned to withstand the economic turmoil that is leaving few in retail real estate unscathed, some property experts say.
Susan Smith, manager for PricewaterhouseCoopers’ U.S. real-estate industry practice, said large traditional malls will likely see bigger declines in foot traffic and occupancy levels, given that they are heavily dependent on discretionary spending.
“During times of economic strength and economic weakness, I would say that most investors feel you can’t go wrong with grocery-anchored strip shopping centers,” Smith said.
Shopping center real-estate investment trusts, usually anchored by supermarkets and big-box retailers, returned 4.56 percent in the year through Sept. 30, while regional mall real-estate investment trusts declined 11.38 percent, according to the National Association of Real Estate Investment Trusts, a trade group.