The newly released white paper “Dollar Days: How Dollar Stores Are Growing a Weak Economy” documents a strong national trend in consumer behavior and its impact on retail leasing. The report, by Ann Natunewicz (head of research for Colliers Retail Services Group), traces the recent aggressive expansion and repositioning campaigns of the four major dollar store chains.
What’s driving the growth of dollar stores?
Obviously, economic conditions have severely impacted consumer behavior, both in terms of disposable income and perception of “value.” Dollar store chains have expanded food offerings, rethought their merchandising strategies, and targeted a higher-end mainstream consumer.
How significant is this trend?
The four largest chains—Dollar General, Dollar Tree, Family Dollar and 99¢ Only—now operate roughly 21,500 U.S. locations. By contrast, the three largest drug store chains combined have only 19,700 locations.
What’s more, dollar stores continue to capitalize on the availability of better space, in terms of demographics, location and footprint. At first, this trend was fueled by recessionary vacancy rates and depressed leasing markets; however, this growth has persisted even in markets that have seen significant recovery in rents and absorption. Growing interest on the part of landlords and property investors indicates that dollar stores have become a more desirable destination, and are favorably impacting traffic and vacancy rates in the shopping centers they occupy.
What does this mean for retail leasing?
Aggressive expansion and larger footprints will continue to drive absorption, even in markets where pricing has normalized, or traditional grocery and drug stores are still prominent.
Dollar store chains will still be able to dictate aggressive terms. Landlords recognize that the dollar store value proposition is part of the “new normal” for consumers, and are attracting a higher-ticket demographic. And, as dollar stores increase their food offering, they drive a higher trip frequency. For smaller regional centers with a local tenant mix, a dollar store can also provide a national-level tenant opportunity.
Where can I find out more?
Download a PDF copy of “Dollar Days: How Dollar Stores Are Growing a Weak Economy” here.
