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
MFPRO+ News | Dec 22, 2023
Document offers guidance on heat pump deployment for multifamily housing
ICAST (International Center for Appropriate and Sustainable Technology) has released a resource guide to help multifamily owners and managers, policymakers, utilities, energy efficiency program implementers, and others advance the deployment of VHE heat pump HVAC and water heaters in multifamily housing.
Giants 400 | Dec 20, 2023
Top 100 Apartment and Condominium Construction Firms for 2023
Clark Group, Suffolk Construction, Summit Contracting Group, and McShane Companies top BD+C's ranking of the nation's largest apartment building and condominium general contractors and construction management (CM) firms for 2023, as reported in Building Design+Construction's 2023 Giants 400 Report.
Giants 400 | Dec 20, 2023
Top 70 Apartment and Condominium Engineering Firms for 2023
Kimley-Horn, WSP, Tetra Tech, and Thornton Tomasetti head BD+C's ranking of the nation's largest apartment building and condominium engineering and engineering/architecture (EA) firms for 2023, as reported in Building Design+Construction's 2023 Giants 400 Report.
Giants 400 | Dec 20, 2023
Top 160 Apartment and Condominium Architecture Firms for 2023
Gensler, Humphreys and Partners, Solomon Cordwell Buenz, and AO top BD+C's ranking of the nation's largest apartment building and condominium architecture and architecture/engineering (AE) firms for 2023, as reported in Building Design+Construction's 2023 Giants 400 Report.
Giants 400 | Dec 20, 2023
Top 40 Student Housing Construction Firms for 2023
Findorff, Juneau Construction, JE Dunn Construction, and Weitz Company top BD+C's ranking of the nation's largest student housing facility general contractors and construction management (CM) firms for 2023, as reported in Building Design+Construction's 2023 Giants 400 Report.
Giants 400 | Dec 20, 2023
Top 30 Student Housing Engineering Firms for 2023
Kimley-Horn, Wiss, Janney, Elstner Associates, KPFF Consulting Engineers, and Olsson head BD+C's ranking of the nation's largest student housing facility engineering and engineering/architecture (EA) firms for 2023, as reported in Building Design+Construction's 2023 Giants 400 Report.
Giants 400 | Dec 20, 2023
Top 90 Student Housing Architecture Firms for 2023
Niles Bolton Associates, Solomon Cordwell Buenz, BKV Group, and Humphreys and Partners Architects top BD+C's ranking of the nation's largest student housing facility architecture and architecture/engineering (AE) firms for 2023, as reported in Building Design+Construction's 2023 Giants 400 Report.
MFPRO+ News | Dec 18, 2023
Berkeley, Calif., raises building height limits in downtown area
Facing a severe housing shortage, the City of Berkeley, Calif., increased the height limits on residential buildings to 12 stories in the area close to the University of California campus.
Condominiums | Dec 12, 2023
5 condominium trends for 2024
While the condo market faces challenges heading into 2024, it continues to adapt to changing buyer preferences and focus on offering luxury experiences.
Codes and Standards | Dec 11, 2023
Washington state tries new approach to phase out fossil fuels in new construction
After pausing a heat pump mandate earlier this year after a federal court overturned Berkeley, Calif.’s ban on gas appliances in new buildings, Washington state enacted a new code provision that seems poised to achieve the same goal.