Grocery Store Openings Spike, With Small Stores Leading The Way

Grocery stores are the stars of the retail industry, anchoring developments large and small and providing one of the increasingly few services that shoppers can't get online. Last year, supermarkets showed their strength by growing their footprints by 30%.

Grocers opened about 17M SF of new space nationwide in 2018, an increase of 29.4% compared with 2017, according to the JLL 2019 Grocery Tracker report. The previous year, grocery chains opened only about 13.4M SF of new space.

The spike in new space is concentrated in growing states such as Florida, Texas and California, with about one-quarter of all new store space last year located in those three. Chains that are already leaders in those places opened most of the new space.

In Florida, for instance, Publix Super Markets is growing rapidly. In Texas, national chains such as The Kroger Co. and Aldi are growing, but so is the regional powerhouse H-E-B. In California, growth was boosted by Sprouts Farmers Market and Aldi, as well as Grocery Outlet and Smart & Final, JLL reports.

Nationwide, Aldi and Sprouts in particular experienced strong growth in 2018. German giant Aldi added 82 stores last year, accounting for 15.6% of all new store square footage in the country, according to JLL. Sprouts opened 30 stores in 2018.

Lidl — a direct competitor to Aldi that opened its first U.S. store in 2017, which was the first of 50 new locations that year — dialed its U.S. expansion back in 2018, opening only 15 stores. The German company did, however, grow its East Coast presence by acquiring Long Island-based Best Market and its 27 locations near the end of the year.

Many shoppers make short, frequent trips to the grocery store for items needed that day, and such trips are best served by smaller stores, the report notes. Grocers are responding by building smaller stores and focusing on local offerings. 

Smaller stores expanding in 2018 included small-format stores such as Aldi, but also smaller versions of typically larger stores, such Hy-Vee Fast & Fresh and Bridge Street Market, a smaller version of regional hypermarket Meijer.

The spike in grocery comes while Amazon is upping its game in the sector. Not content merely with expanding Whole Foods — though it's doing that, too — the e-commerce giant is also planning a line of separate grocery stores, the first of which is expected to open toward the end of this year.

Amazon is also expanding its cashless convenience store brand Amazon Go, though the company is getting some pushback from activists who assert that cashless stores marginalize low-income people. A handful of places have already banned cashless retail.