For more than a decade, apartment developers have been talking about their desire to be close to Whole Foods. Their reason: The proximity to the premium grocer would lead to higher rents. If this location is in your building, the results could be even better.
In a 2016 study, RCLCO backed those claims with analysis that showed ground floor Whole Foods can increase rental premiums, improve absorption, and accelerate rental growth in the buildings they use.
After Amazon acquired Whole Foods in 2017 and other premium grocers gained market share, RCLCO decided to investigate whether the presence of these grocers contributed to residential homes achieving premium rental rates, higher rental growth over time, and oversized ones Capture demand during the lease.
RCLCO found that flat-sharing communities with whole foods on the ground floor earn an average rental premium of 5.8% compared to comparable flat-sharing communities in the immediate vicinity. This is an increase of 1.5% compared to the 2016 results.
Trader Joe also scored well. Buildings with this retailer also had a 5.8% rental premium. Buildings with other grocers fell behind Trader Joe and Whole Foods, but still returned a 3.3% rental premium.
Whole-food properties, which earned the highest premiums, also saw the largest rental growth, reflecting a positive linear relationship between rental premium and rental growth, according to RCLCO. On the flip side, higher premiums in communities with a Trader Joe didn't match more robust rental growth.
If a premium grocer is a residential home, that community will often capture more than its fair share of market demand, according to the RCLCO
"We analyzed the absorption performance of eight case studies with premium grocers on the first floor," write Derek Wyatt, Vahe Avagyan and Nicholas Stefanoni. “A new building with a premium grocer on the first floor can expect to rent units at a rate that is at least as high – but often more than that – to get a fair share of the absorption of submarkets during the rental period. When these grocery-anchored buildings are first opened, their capture rates tend to exceed their fair share of submarket demand, but stabilize to near fair shares over time. "
