The report found that the median cap rate for single tenant net leased Dollar General and Family Dollar properties compressed by 16 basis points between the third quarter of 2011 and the first quarter of this year. This is due to a lack of investment-grade assets available at a low absolute dollar amount, historically low interest rates, and a surplus of 1031 exchange investors with low equity requirements.
Dollar General and Family Dollar assets have an average asking price of $888,754, giving an average price per square foot of $103. There is a strong consumer demand for dollar stores, and there are rapid expansion plans for Dollar General and Family Dollar for next year. This year Family Dollar increased new store development by more than 50%, and there were 1100 new Family Dollar and Dollar General stores constructed.
These stores attract customers due to the low cost of the goods sold as well as the convenience of the smaller store format. Dollar stores have also increased the competition for grocery stores, and there is an increasing percentage of consumers who purchase grocery items at dollar stores each year.
Transaction volumes are heavily concentrated in recently constructed dollar store properties, but those stores located in above average markets with strong demographics are in high demand. It is expected this demand will remain high as private investors continue to look for properties with long-term leases, attractive price points and investment-grade tenants. You can read the full report here.
The Boulder Group is a boutique investment real estate firm specializing in single tenant net lease properties. It is headquartered in suburban Chicago and was founded in 1997.
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