Immigration Crackdown Dents Demand For Fast-Growing Ethnic Grocery Chains

Sustained growth in large-format grocery stores catering to specific regional and ethnic cuisines has been supercharged by both the diversifying demographics of the United States as well as a nationwide embrace of foodie culture.

But an increased presence of immigration authorities in growth hubs for these retailers, particularly in Los Angeles, has taken a bite out of customer bases and foot traffic.

“If anybody denies there’s an impact, that’s naive, because there is,” Avison Young principal and Director of Retail Market Intelligence Meghann Martindale said. “There’s an impact on the employee side, with staffing for these small businesses. But the other element is people are scared to go out, so not only will you see a drop in foot traffic, but you’ll see a drop in sales. I don’t think we can fully quantify that impact yet, to be honest.”

Regional chains offering products from East and South Asia as well as Mexico and other Latin American countries have announced expansion plans in major U.S. markets, including Southern California, Texas and the East Coast.

Korean-focused H Mart, with nearly 100 locations, plans new stores and renovations this year in California, Florida, Washington and New Jersey, while Asian grocer 99 Ranch, with 63 locations, recently announced an East Coast expansion plan.

Mexican chains Northgate, with over 40 locations, and Vallarta, with 55 stores, are building new locations. Patel Brothers, with over 50 outposts across the country, just started expansion in the Austin market. T&T, a Canada-based Asian grocery giant, recently announced plans for U.S. expansion, with a location planned for Irvine, California, in 2026. 

Ethnic grocers have long been a staple in big coastal markets, but they are becoming a nationwide phenomenon, Martindale said.

“I think there's continued growth for all,” said The Econic Co. founder and principal James Chung, a retail specialist who has long worked with these chains. “More so than the traditional grocery.”

Like all retail anchors, ethnic grocers depend on foot traffic and constant streams of new shoppers. But some of the locations in Los Angeles have seen significant foot traffic declines during the same weeks as the federal step-up in immigration enforcement across Southern California, according to Placer.ai data provided to Bisnow by Martindale. Many other local restaurants and retail locations have reported slower-than-average traffic.

There’s been a noticeable impact on foot traffic and smaller crowds at mall promotions and events in Southern California, said NewMark Merrill Cos. CEO Sandy Sigal, who compared the impact of increased immigration enforcement and anxiety to the vanishing of shoppers during Covid lockdowns, but specific to communities of color.

“There was a car wash adjoining one of our centers that wasn't part of our center, and they came in, and I don’t know how many of the people they took were illegal versus just suspected of being illegal,” Sigal said. “But let me tell you, when that happens right next to your shopping center, there's a little bit of a chill.” 

Northgate Market, for instance, with 35 of its 43 locations residing within the Los Angeles region and a customer base that is roughly 70% Latino, has seen foot traffic increase for both the past 12 months and six months on a year-over-year basis. But between June 9 and July 6, traffic has seen consistent drops of nearly 5% across California and approaching 8% in Los Angeles, according to Placer.ai data.  

Northgate and Vallarta declined repeated requests for comment from Bisnow, but both chains have posted messages on their Instagram accounts in recent weeks offering solidarity with immigrants and, in the case of Northgate, refuting unsubstantiated rumors of workplace raids.

This foot traffic decline coincides with the federal government increasing immigration enforcement in Los Angeles, including deploying federalized National Guard troops and U.S. Marines.

The growth in ethnic grocery stores has been boosted in recent years by both the population shift due to increased immigration and the mainstreaming of more diverse cuisine and foodie obsessions. 

Martindale points to the ever-expanding ethnic food aisles in mainstream grocery stores as an indicator of this cultural shift. Ethnic grocers also enjoyed a strong resurgence postpandemic as locations providing grocery, dining and entertainment.

“These operators are starting to see with their analytics that their customer profiles are definitely getting more blended,” Chung said. “They are finding that as the demos evolve and the generations evolve, a second-generation Asian customer like myself isn't necessarily going to be as loyal to just a Korean grocer, right? My parents might be, but I’ll be shopping at all of these types of stores.”

These large-format stores also boast unique real estate advantages that can make them more appealing investments. Grocery retailers in general tend to serve as anchors for surrounding tenants, but in this case, the cultural pull of these stores creates unique hubs for all varieties of multicultural merchants.

And unlike more standard grocery stores, which often face competition from rivals in the same neighborhood or even block, these markets aren’t nearly as densely situated. 

Chung said REITs such as Regency Centers and Kimco Realty have already invested in these chains and include them as part of their larger portfolio strategy, seeing them as valuable grocery-anchored retail investments at a time of low national retail vacancy.  

In 2023, Boston-based Longpoint Realty Partners closed a $225M fund aimed at investments for multicultural grocery stores, and Minneapolis investors just began raising funds for an Asian Center Real Estate Fund.

Many of these types of grocers are also slightly smaller than mainstream grocery stores, sized in the 10K to 15K SF range, so they’re a fit to pick up empty drugstore spaces, like former Walgreens and Rite Aid locations.

Rising rent and trade uncertainties have driven a rise in retail vacancies, up 20% over the same period last year, according to new data from Cushman & Wakefield.

Now, despite these active expansion plans, these companies face headwinds in the form of tariffs as well as immigration, which impacts staffing and shoppers. Chung said tariffs have been an issue, but many retailers haven’t been as vocal about the challenges and potential cost increases since levies are a macroeconomic headwind impacting all segments of the economy, not just grocery.

Martindale says there could be a “double whammy” with Latino shoppers, who tend to be undervalued in terms of their impact on store sales since much of their shopping is in cash and debit cards. She said it could be a year before the full economic impact on Southern California is felt.

“It’s hard to know if there’s a slowdown in that trajectory, or something market specific, or won’t impact the overall expansion rate,” Martindale said. “I think it might be a temporary setback.”