B+E Market Report: Dollar Stores
B+E takes a look at current net lease Dollar Store market activity:
- Historical & on-market sale prices
- On-market cap rates
- Lease terms & more!
Amid rising inflation and interest rate hikes causing concern for the commercial real estate market, dollar stores have held steady as an asset that flourishes in a recessionary environment, proven by the 2008 market crash and 2020 pandemic.
Q3 2008
During a time when the majority of industries were at a loss, Dollar General’s sales climbed 12.4% and Dollar Tree’s sales rose 11.6%, according to quarterly reports.
Q1 2020
Due to the economic shocks of Covid-19, Dollar General witnessed a 21.7% increase and Dollar Tree saw a 7% increase in sales year-over-year, according to BisNow.
Q3 2022
The S&P 500 Index has fallen approximately 18% in market value this year, while Dollar General (NYSE: DG) has risen around 8.5% and Dollar Tree (NASDAQ: DLTR) has soared 15.99%.
Although dollar stores aren’t full-service grocers, shoppers nationwide are turning to dollar stores to combat the rising CPI for food items. As of October this year, the CPI for food items has increased approximately 10.9% year-over-year, according to the U.S. Bureau of Labor Statistics.
These cheap consumer goods are in demand across all income classes as Dollar General reports a shift to a more robust consumer group with salaries ranging from $75,000 to $100,000 and Dollar Tree reports most of the store’s new customers having salaries of $80,000 or more.
In Q4, investors are looking to place the capital they’ve raised over the course of 2022. With a surplus of properties on market across all asset types, recession-resistant properties are most appealing. With generally good credit and higher cap rates, B+E expects dollar stores to carry the retail sector in Q4 and upcoming quarters.