Faris Lee’s New Partnership Aims to Lessen Grocery-Anchored Investment Risk

The Irvine, Calif.-based firm has entered into an exclusive partnership with MTN Retail Advisors, a grocer-specialized data collection and analytics provider.

Like much of the retail industry today, the grocer landscape is in a state of flux. New competitors have entered the market, online continues to chip away at brick and mortar, rightsizing is rampant and traditional grocers are charting their next moves. These moves include everything from evaluating the abundance of second-generation space to acquisition/disposition strategies and balancing e-commerce platforms as grocers look to adapt in this ever-evolving world. On top of that, the industry is facing some negative press coverage, which continues to over exaggerate the demise of brick-and-mortar retail.

In fact, the grocery industry is actually expanding. Overall industry revenue has grown an annualized 0.9%, on average, between 2014 and 2019, according to market research firm IBISWorld. Grocers show no sign of slowing, as the $654.6 billion industry is predicted to grow at an annual rate of 1 percent through 2024.

But just where do these growth opportunities lie for investors? What markets, store size, tenants, format types, co-tenants and demographics will yield the best results, and which grocery-anchored assets are likely to be at risk and why?

To best determine these answers Faris Lee Investments has struck a partnership with MTN Retail Advisors, a Salt Lake City-based provider of market insights that help retailers, municipalities, developers and real estate investors answer their most challenging market questions with as much certainty as possible. MTN’s proprietary analytics include more than 125 real estate, shopping centers and grocery tenant attributes, as well as records on more than 28,000 active US grocers. This number is expected to jump to 40,000 records over the next 18 months.

“The importance of having this type of granular information is that MTN has a long history of markets and market trends,” Doug Munson, principal and founder of MTN, says. He adds that the company can watch and predict trends and other disruptors, and then understand what the key metrics and influences are that either promote the real estate opportunity and strength of the operator, or shy away from them.

Paired with Faris Lee Investments’ advisory expertise, this partnership will utilize MTN’s analytics through valuation, underwriting and risk-opportunity assessment to examine the real estate in any local market for the benefit of the occupier, investor/developer, and lender.

The Growing Influence of Grocers
There are many reasons why grocery-anchored shopping centers continue to be a darling among many retail investors. They tend to boast lower cap rates, increasing prices and are generally more internet-resistant than other retailers. Add to that a strong economy, low unemployment and high consumer confidence, and it’s easy to see the value in these anchor tenants, which bring consumers through their doors an average of 1.7 times a week.

However, the industry is not without its challenges – and these aren’t just limited to the grocer.

“Our mantra at MTN is ‘as the grocer goes, so goes the rest of the shopping center,’” Munson says. “The grocer is an influencer to any shopping center. Obviously, a strong grocer will draw more customers. A weaker one, less so. The impact on co-tenants is huge.”

Rick Chichester is president and CEO of Faris Lee Investments


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