Internet competition has eviscerated portions of the retail sector, but many dollar store brands keep expanding, and investor interest remains steady. The overall second quarter asking cap rate for dollar stores was 7.1%, unchanged compared to the same period in 2018, according to the latest Net Lease Dollar Store report by The Boulder Group.

“The stability of the sector can be attributed to the majority of the supply of listed properties being new construction as the sector continues to develop stores at a rapid pace,” The Boulder Group President  Randy Blankstein said.

Wilmette, Illinois-based Boulder defines the dollar store net lease market as free-standing Dollar General, Dollar Tree and Family Dollar properties. These three brands have a total of more than 30,000 stores, the vast majority of the overall market. Of the three, Dollar General cap rates remained constant at 7.05%. Family Dollar cap rates declined by six basis points to 7.25% and Dollar Tree cap rates increased by eight basis points to 7.1%.

Dollar General, considered the sector leader, plans to add another 1,000 locations in 2019. That means a constant supply of newly constructed assets with long-term leases, which investors value most of all, Blankstein said.

The dollar store sector did struggle some in 2018 and 2019. Although Dollar General is on the upswing, Dollar Tree's $8.5B acquisition of Family Dollar in 2015 caused headaches this year as company officials continue integrating their operations. They plan to close nearly 400 Family Dollar stores this year.