Dollar Stores Remain Popular With Investors, Consumers

A Dollar General Corp. store in Creve Coeur, IL.

CHICAGO—The US dollar store sector has continued to expand in the past year due to consumers’ demand for low-cost goods. That expansion has also opened up a lot of opportunities for investors that want to jump into this robust segment of retail. Cap rates for single tenant net lease dollar stores increased by 15 bps from the second quarter of 2015 to the second quarter of 2016 to a 6.65% cap rate, according to a new report from the Boulder Group, a net lease firm in Northbrook, IL.

In its report, the company examined recent sales of free standing Dollar General, Dollar Tree and Family Dollar properties, as these tenants represent the largest presence within the sector. Cap rates for Family Dollar assets remained unchanged at 6.5%, while Dollar General and Dollar Tree experienced increases of 10 and 15 bps each, to 6.6% and 7.0%, respectively. Each of these tenants has expansion plans, so a strong pipeline of new construction assets should remain.