By Chris Cobb | Associate
Welcome back to the Big3 with CC, your weekly real estate investment source. It is Army-Navy Football week in America. When it comes to college football, Army, Navy, and Air Force are the Big3 as they all compete for the “Commander-in-Chief’s” Trophy and a chance to visit the White House. The winner of the Army-Navy game this weekend will get that chance.
With the rise of e-commerce, some traditional retail investments are losing value, particularly in the sector for clothing and apparel. Let’s explore one type of investment that appears to be immune from e-commerce, Dollar Stores:
Not Sexy, But Stable.
Dollar General, Family Dollar, and Dollar Tree are some of the robust workhorses in the discount shopping universe that continue to forge ahead like the little engine that could. Top brokers across the country, such as Marcus & Millichap, report that free-standing triple net leased dollar stores are among the safest in the retail game. When considering an investment, risk is at the top the list. Sure, you may not make a killing from a dollar store, but if you beef up your portfolio with a few, you can rely on their performance for years to come.
Solid Returns and Capitalization Rates.
In a recent report from The Boulder Group (an advisory firm that specializes in retail) the median asking price for dollar stores under the banners of Dollar General, Family Dollar and Dollar Tree varied from nearly $1.3 million to $1.8 million. Median cap rates ranged from 6.7 percent to 6.9 percent. Along the Gulf Coast, more and more dollar stores are hitting the market for sale with an average price closer to $1 million.
Dollar store customers are far less likely to shop online than other consumers. Customers generally live in close proximity and can buy most of what they need quickly. The communities that surround the dollar stores are more likely to drive to the store than to shop online and have it delivered. In addition, dollar store chains still rely greatly on their brick-and-mortar presence rather than investing heavily in e-commerce.
When it concerns real estate, invest yourself.