Everything You Need to Know About the Wild Rise of Organic Grocers
Investors love them because they're recession-proof, homebuyers love them because they add value, and consumers love them because they're healthy. We are talking about premier organic grocery stores, and they're taking America by storm. From larger chains like Whole Foods and Trader Joe's, to up-and-comers like Sprouts and Hannaford, we are going to navigate through the organic craze and its value-adding potential.
It's widely known that investors traditionally love grocery store anchors because they're stable and sign longer leases. Never has that been more true then with Mariano's Fresh Market, which is proving to be a hot commodity. In May, Centrum Partners sold Skokie Commons, a Chicago retail center anchored by a Mariano's, to JLL for $48.5M. And in Glenview, LaSalle Investment Management dropped $50M on another Chicago shopping center, also anchored by a Mariano's. Investors have plunked down more than $300M on properties anchored by Mariano's since 2014, in large part because they like the chain's state-of-the-art stores, and strong site selections. Mariano's plans to have 39 stores by the end of 2016, and pull in $1.5B in annual sales by the end of this year. That's up from $1.12B in 2014, and $533.6M in 2013.
In Chicago, a $140M mixed-use development in Northbrook will be anchored by a Moriano's. Similarly, two upcoming Brooklyn projects will be anchored by a Trader Joe's: an 18k SF store planned for a 45k SF mixed-use Alliance Private Capital development in Williamsburg, and a 13.7k SF lease at City Point (rendering pictured), a 1.8M SF mixed-use development by Acadia Realty Trust and Washington Square Partners. In Duluth, GA, Sugarloaf Market, a 31-acre mixed-use project featuring luxury apartments, will be anchored by a Sprouts Farmers Market.
It appears organic grocery chains may also boost home values. A study by RealtyTrac reveals homes near Whole Foods appreciate 34%. In fact, there's a term for the popular chain's ability to raise property values in up-and-coming neighborhoods: the Whole Foods Effect. And Whole Foods isn't the only premier market making neighborhoods more attractive. Chains like Eataly (pictured) have even been credited with helping to revive areas like New York City's Flatiron District by drawing tourists and residents alike.
And it's not just the wealthy who are interested in eating healthily these days. That's why discounted brands like Trader Joe's (pictured) have taken off. In fact, people who live near a Trader Joe's see a 40% appreciation in home value, even higher than those who live near a Whole Foods. Sprouts is another less expensive alternative giving Whole Foods a run for the money, with more than 200 locations. Albertsons also has a line called Wild Harvest, which runs about 15% cheaper than name-brand organic products. Feeling the pressure of these less expensive brands, Whole Foods is cutting 1,500 jobs in an effort to lower its prices. The popular chain is also coming up with its own cost-conscious Millennial-based spinoff, 365, starting next year. The new concept will have a stronger focus on technology and social media, for an interactive experience, and it will be in more underserved markets to give lower-income residents better fresh food options.
Organic grocery chains are doing so well that even more traditional stores are jumping on the bandwagon. Food Lion has a boutique offshoot call Bloom, and Publix has a spinoff call Publix GreenWise Market. Kroger and Walmart have developed organic lines that are performing strongly. Even SuperTarget has mini markets which offer organic dairy items, produce, and brands like Kashi and Sahala Snacks. Other chains to look out for are Hannaford, which is the largest certified organic supermarket in the Northeast, and Pathmark, which is the Northeast's largest retailer of local produce.