As Branch Properties and Brett Horowitz saw competition increase to buy grocery-anchored centers in the Sun Belt, the realization dawned that there was another way to increase the company's holdings in that retail property type.
Branch, a 50-year-old company that had been buying centers for years across the South that could benefit from renovations, saw opportunity in building new properties anchored by grocery chains, especially fast-growing Publix Super Markets.
"We made a switch really more like three to five years ago to developing grocery-anchored products," Horowitz, partner of asset management at Branch, said in an interview. "And that was just a result of the grocers expanding rapidly, specifically Publix."
Atlanta-based Branch is developing and close to finishing five Publix-anchored centers and plans to start two more in the next 12 to 18 months, Horowitz said. The centers nearing completion are in Milton and Navarre in Florida; Huntsville, Alabama; Moncks Corner, South Carolina; and Atlanta.
The availability of grocery-anchored centers is low and competition for them is high as they remain popular with investors seeking retail centers, Horowitz said. The pandemic spotlighted the importance of grocery stores and the role they play as anchor tenants.
"I think the people who have grocery-anchored product are reluctant to sell it because there's just not a lot of it out there," he said. "And so once you sell, it's hard to buy. And so generally a lot of the investors are underweighted in retail. That's been the case for a long time."
Last year, more than $11.5 billion of grocery-anchored shopping centers traded hands, according to CoStar data, as investors, feeling more confident about leasing prospects for in-line spaces — or the real estate between anchor and larger tenants — continued to seek out the stability of this type of retail center.
Horowitz said he expects grocery-anchored centers to remain popular this year and beyond. Competition is so high for them, he said, that buyers need to be aggressive.
"That's the name of the game," he said. "I think before they even take out the market, there's a bunch of unsolicited offers and [buyers] trying to get their names ahead of everyone else."
As Branch seeks new development opportunities, it will continue to focus on the Sun Belt, Horowitz said.
"We focus on the Southeast specifically for job growth, right-to-work states," he said. "We've been in Atlanta for 50 years. We know that market, and we know the states surrounding it. So we ideally try to focus on Florida, South Carolina, North Carolina, Tennessee, Alabama. And so luckily for us, those have been growth states in the last 20 years, and it's been good."