Optimizing land usage is becoming an even bigger priority for developers. In some city centers, many large grocery stores sprawl across valuable land. This inefficient use of space doesn't reflect the best possible use for these desirable locations, according to the recent RCLCO report The Supermarket Rental Sweep: Analyzing Multifamily Rent Premiums Generated by Grocery Store Anchors.
One way for grocers and retail outlets to increase interest in a desirable location is by partnering with multifamily developers. The strategy of building housing above a ground floor store not only adds an extra amenity for residents, but increases the rental premium desired by developers.
Rental Rate Premiums from Ground-Floor Grocers
The multifamily performance of such partnerships is nothing to scoff at. The RCLCO analysis finds that apartment communities with a ground-floor Whole Foods achieve a rental rate premium of 6% on average—comparable to similar communities in the immediate area.
A similar figure is present for Trader Joe communities; these premiums average out to 5.6% which is down only slightly from 5.8% in 2020. In other premium grocers like Fairway, Safeway, Sprouts, and Harris Teeter, the above-ground community premium increased from 3.3% in 2020 to 5.2% in the 2023 study.
Rent Premium by Grocer
For its analysis, RCLCO looked at the scale, age, type of construction, quality, and market positioning of nearly 100 mixed-use centers compared to their local counterparts. These include 37 multifamily properties with a ground-floor Whole Foods, 21 with Trader Joe’s, and 30 with other premium grocers.
RCLCO identified two to five similar apartment buildings in each local neighborhood and adjusted the rents to account for size differences. Then, they compared the adjusted rents of these similar buildings to the average rent in the grocer-anchored case study building. The researchers believe this methodology led to a quality-adjusted comparison that could point to the direct impact that a ground-floor grocer has on a community (as opposed to rent prices being higher due to higher quality amenities and finishes).
In general, the strong performance of apartments with ground-floor grocers since RCLCO’s 2016 study indicates that “the momentum for these mixed-use offerings continues to grow.”
Click here to read the full findings of the RCLCO report: The Supermarket Rental Sweep: Analyzing Multifamily Rent Premiums Generated by Grocery Store Anchors
RELATED
Related Stories
Mass Timber | May 17, 2024
Charlotte's new multifamily mid-rise will feature exposed mass timber
Construction recently kicked off for Oxbow, a multifamily community in Charlotte’s The Mill District. The $97.8 million project, consisting of 389 rental units and 14,300 sf of commercial space, sits on 4.3 acres that formerly housed four commercial buildings. The street-level retail is designed for boutiques, coffee shops, and other neighborhood services.
Affordable Housing | May 14, 2024
Brooklyn's colorful new affordable housing project includes retail, public spaces
A new affordable housing development located in the fastest growing section of Brooklyn, N.Y., where over half the population lives below the poverty line, transformed a long vacant lot into a community asset. The Van Sinderen Plaza project consists of a newly constructed pair of seven-story buildings totaling 193,665 sf, including 130 affordable units.
MFPRO+ News | May 13, 2024
Special multifamily report indicates ‘two supply scenarios’
Could we be headed towards a “period of stagflation?” That's the question Andrew Semmes, Senior Research Analyst, poses in the Matrix May 2024 Multifamily Rent Forecast update.
MFPRO+ News | May 10, 2024
HUD strengthens flood protection rules for new and rebuilt residential buildings
The U.S. Department of Housing and Urban Development (HUD) issued more stringent flood protection requirements for new and rebuilt homes that are developed with, or financed with, federal funds. The rule strengthens standards by increasing elevations and flood-proofing requirements of new properties in areas at risk of flooding.
Adaptive Reuse | May 9, 2024
Hotels now account for over one-third of adaptive reuse projects
For the first time ever, hotel to apartment conversion projects have overtaken office-to-residential conversions.
Mass Timber | May 8, 2024
Portland's Timberview VIII mass timber multifamily development will offer more than 100 affordable units
An eight-story, 72,000-sf mass timber apartment building in Portland, Ore., topped out this winter and will soon offer over 100 affordable units. The structure is the tallest affordable housing mass timber building and the first Type IV-C affordable housing building in the city.
MFPRO+ News | May 8, 2024
Multifamily rent growth approaches peak levels in April 2024
In its latest multifamily report, Yardi Matrix finds that the national average rent has increased for the second month in a row.
Senior Living Design | May 7, 2024
Living community opens for seniors seeking affordable housing
San Diego-based nonprofit affordable housing developer Community HousingWorks (CHW) celebrates the opening of Puesta del Sol Apartments, a new development with 59 apartments for adults 55 years and older.
Student Housing | May 3, 2024
Student housing construction dips in the first quarter of 2024
Investment in college dorms dipped slightly in the first quarter of 2024, but remains higher than a year ago.
MFPRO+ News | May 1, 2024
On the Domino Sugar refinery site, new Brooklyn condominiums offer views of the Manhattan skyline
In Brooklyn, New York’s Williamsburg neighborhood, the new One Domino Square is the first condominium development and the third ground-up residential building on the site of the Domino Sugar refinery. The 700,000-sf project is adjacent to Domino Square and anchors a new 11-acre public park.
