Grocery-Anchored Hubs Continue to Draw Investment as Tariffs Ding Other Retail

The seesawing nature of President Trump’s global tariffs has taken on the character of weather: unpredictable, capricious and impactful. For Mark Sigal, CEO of Datex Property Solutions, the best comparison for how these constantly whipsawing costs will hit the retail real estate world — including its grocery-anchored sites — is a tsunami.

It’s clear the earthquake has happened, but the waves remain out at sea. It’s a waiting game to see how hard those waves will hit land, and whether they wreak havoc or wither to mere ripples.

But, amid the anxiety, that grocery-anchored retail in particular continues to perform, and prove itself a sound investment, just as it has historically done during periods of recession and black swan moments like COVID. While tariff pressures and small margins may hit shoe stores, electronics retailers, mobile phone outlets and Dollar Trees, grocery brings return traffic and a degree of mandatory spending by consumers.

Sales in these stores are up nearly 16 percent year-over-year, per Datex’s 2025 market outlook report, and chains including Sprouts, Trader Joe’s and Erewhon have recently announced expansion plans. The vacancy rate for grocery-anchored sites has dipped to just 3.5 percent at the end of 2024, per JLL, below the pandemic-induced peak of 4.5 percent in mid-2021.

“Consumers just have this inelastic need, and, at most, you may see some dollars move around between grocers, and people buying slightly less fancy food,” said David Greensfelder, managing principal of consultancy Greensfelder Commercial Real Estate. “Grocers are the Marines of retail — they just keep putting one foot in front of the other.”

In early May, retail analysts were predicting store shelves would start to show the impacts of the slowdown of trans-Pacific trade in weeks, not months. Then, on May 12, the new tariffs on China dropped from 145 percent to 30 percent following overseas trade talks, one of at least 50 such tariff policy shifts already made during Trump’s second term.

“​​Retail is always the most brutally efficient, most brutally competitive category,” said Sigal, outlining a worse-case scenario. “If you play this out, two-thirds of the economy is driven by consumer spending. That affects retailers, their capacity to pay rent ends up being impacted, which means more store closures and more unemployment, and that’s how you get into really scary economic scenarios.”

The full impact of tariffs on retail performance has just begun to play out, as well as the feared recessionary impact of rising prices for consumer goods. Retail leasing had been in an expansionary mode since the middle of 2020, with absorption steadily increasing. It wasn’t until the first quarter of 2025 where the market saw negative absorption, said James Cook, senior director of Americas retail research for JLL, partially on closure news from Walgreens, Family Dollar, Joann, Party City and Big Lots. Neighborhood and community centers alone saw 5.2 million square feet of negative absorption in the first three months of 2025, per JLL.

Part of the continuing strength of grocery amid wider retail challenges comes from the substantial efficiency the sector has already achieved. When Amazon purchased Whole Foods in 2017, there was a perception that the online retailer’s logistics dominance would help it conquer the market. What was lost was that the industry was already incredibly efficient and used to operating on razor-thin margins.

Fold in the increased segmentation offered to food shoppers, based on demographics and income levels, and investment in better store experiences — especially in established, mature markets, grocers see more return from refreshing existing stores — and it makes sense that grocers, and grocery-anchored retail, would be big benefactors from the shake-ups of the last few years.

JLL research found that grocery-anchored centers represented 31 percent of all retail acquisitions in the first quarter of 2025, way ahead of malls at 10 percent and second-place neighborhood centers at 23 percent. Rent growth was 3.1 percent in 2024, the highest among all retail subtypes. Investment giant Nuveen, for instance, just announced a $320 million fund to invest in grocery-anchored retail across the U.S.

“I think the big chains are pretty well positioned to weather the storm,” said Cook. He said grocery-anchored retail has been the hottest retail type for a number of quarters, with the investment volume increasing quarter to quarter. He speculates that will only grow.

JLL analysis of grocery investment shows growing diversification, with private investors increasingly losing share to increased activity from real estate investment trusts such as Brixmor, Phillips Edison & Co., Cohen & Steers, ShopOne, Agree Realty Corporation and Regency Centers, as well as grocers themselves, such as Publix and Trader Joe’s investing in their own real estate. It’s a fragmentation that analysts believe underscores confidence in the market.

For landlords, it doesn’t hurt that many grocery anchors are on rent structures tied to sales, which means that inflationary or tariff-led increases in prices, and revenue, will get passed directly through to them. It’s sort of a hedge against tariffs, said Cole Perry, associate director of research for intelligence platform Altus Group.

It’s even more important in a brutally competitive retail real estate market. Retail occupancy costs — a measure of the cost of leasing relative to the sales a space generates — recently hit a seven-year high, said Sigal. That’s partially a feature of the lack of new retail supply in recent years. At the same time, rent rates for renewals are higher than renting new spaces, which tells him that retailers are seeing that the grocery grass isn’t necessarily greener elsewhere.

But that doesn’t mean landlords aren’t meticulously following economic data and keeping on top of shifting tariff impacts. Sandy Sigal, president and CEO of NewMark Merrill, compared this moment to COVID in terms of the engagement his firm has had with tenants about their particular supply chain situations. NewMark Merrill even has an algorithm that parses out inventory challenges faced by tenants and factors in rent rolls, showcasing which shopping centers are most exposed.

“We’re talking to every single tenant,” Sandy Sigal said, “analyzing where they source. It’s a big data analytics puzzle. There’s just no conversation today that doesn’t include how you’re impacted by the tariffs.”

New leasing for grocery-anchored spaces will likely suffer for the next few months. The current market uncertainty has hamstrung deal-making. Unreleased data from Altus Group shared with Commercial Observer currently shows that, while there have been broad declines in investment transactions in terms of the number of deals and the value of assets, retail hasn’t been hit as hard as other sectors thus far.

Tariff pressure will likely hit ethnic grocers with lots of imports and also hurt mom-and-pop shops, said Meghann Martindale, a principal and retail expert at Avison Young, since they don’t have the scale to negotiate with suppliers (see supermarket giant Albertson’s late April letter demanding that suppliers spell out exactly why they need to increase prices).

“These kinds of events are simply fueling the strength of the big guys,” Martindale said.

And though many retailers have discussed expansion plans — such as Costco, Barnes & Noble and Home Depot — Sandy Sigal has taken a wait-and-see approach to evaluating these promises, which may hinge on how much tariffs hit bottom lines. Derek Wyatt, a managing director at consultancy RCLCO, says it’s simply too early, and the situation too uncertain, to make accurate predictions on retail’s future, or for investors to change their strategies.

Consumer spending will be closely watched to gauge how tariffs shift shopping patterns. Shoppers actually spent more in March, which many analysts argue was an attempt to stock up ahead of higher tariffs. Retail sales were up in April, too, per federal figures, though less steeply than in March.

The uncertainty can be crippling. In roughly three months, plans for holiday shopping will start to ramp up, said Martindale, so retail landlords will need to start figuring out their leasing strategies, tariffs or not. But one thing that seems certain is that grocers will still be a big draw.

“People may stop buying the Hailey Bieber smoothie at Erewhon, and instead get a green juice at Whole Foods, right?,” said Wyatt. “But that doesn’t change the dynamic that they still need to go to grocery stores, and they’re still going to be interested in the experiences that were driving the market in the past few years.”