As strip mall owners adjust for the impact of COVID-19, a global research and analysis company recommends landlords should consider building automated warehouses for supermarket tenants to capitalize on the demand for online deliveries, Bloomberg reported.
BTIG LLC analysts Michael Gorman and James Sullivan said real estate investment trusts (REITs) that own shopping centers and lease to grocers may want to add “microfulfillment centers” (MFCs). In a detailed analysis, they said such facilities can reduce the time it takes to fulfill an online order to five minutes, down from one hour.
“Developing cutting edge microfulfillment centers in their properties could fix critical gaps in online grocery fulfillment, increase store productivity and make REIT shopping centers even more critical real estate,” Gorman and Sullivan wrote, Bloomberg reported. “We think that REITs with good properties, good grocery tenants, and strong balance sheets should be defensive and generate above-average growth.”
BTIG’s recommendations come as supermarket spending and online delivery platforms have surged as a result of the pandemic and the lockdowns. Customers are not eating out due to shutdown orders in most states, and grocery food purchases have skyrocketed.
Today, grocery spending is as much as 90 percent of the average consumer’s food budget due to the pandemic, up from well below 50 percent, Gorman and Sullivan wrote, according to Bloomberg.
The survey said online grocery shopping was 2 percent of the sector before the COVID-19 outbreak, Bloomberg reported. Some projections say online grocery sales are up by as much as 40 percent during the pandemic.
These MFCs can help overcome the tiny profit margins and inefficiencies that previously characterized online food shopping, the survey said, according to Bloomberg. BTIG analysts noted the cost to build such facilities range from $2 million to $3 million and several chains, including Walmart, are already doing it.
Grocers are winning the food fight against restaurants for now. PYMNTS data revealed that before the pandemic began, more than 80 percent of consumers reported eating in restaurants regularly. But by the end of April, that number had fallen by more than 90 percent. While some consumers switched to ordering out, most decided to cook at home more often, the survey found.