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ENCINO, CA-With consumers watching their wallets ever more carefully, some say discount retailers are poised to reap what rewards are to be had in the current economic environment. “As consumers grow increasingly cost-conscious, opportunities are emerging for discount retailers,” notes the recently released first half 2009 Single-Tenant Outlook retail research report from Marcus & Millichap’s research services group.

Indeed, as the report notes, Goodlettsville, TN-based Dollar General Corp. has plans to open 450 new stores, which it says it expects to create as many as 4,000 new jobs. “Our growth will add positions in many markets severely hit by the recession,” Dollar General senior vice president and “chief people officer” Bob Ravener says in a recent announcement. The company’s same-store sales in February 2009–the most recent period reported–were up 15.1% over the prior year.

Family Dollar Stores Inc., based in Matthews, NC, has also seen business increase. Its comparable store sales for the second quarter of its fiscal year (which ended February 28) were up 6.4% from a year earlier. “In today’s challenging economic environment, families of all incomes are looking for ways to save money,” chairman and chief executive officer Howard Levine said recently. “Our strategy of providing both value and convenience continues to resonate well with consumers.”

Other cost-friendly retailers include membership-based wholesalers like Natick, MA-based BJ’s Wholesale Club Inc.; Issaquah, WA-based Costco Wholesale Corp.; and Bentonville, AK-based Sam’s Club are seeing mostly positive sales trends as well. For BJ’s, comparable store sales excluding gasoline for March 2009 were up 8.5% from a year earlier, although Costco’s comparable sales for March were down 5% from a year earlier. Sam’s Club saw a 6.2% increase in comparable sales (excluding gasoline) for March 2009, a reflection of “robust member demand for Sam’s value on food and consumables,” according to vice chairman Eduardo Castro-Wright in an announcement last week.

Some brokers say these consumer shopping trends are translating into single-tenant retail property market activity. “Transaction velocity for discount stores picked up 17% last year, while the median price rose 22% to $104 per square foot,” the Marcus & Millichap report states. “Some of the price growth is attributable to new properties trading during that time, rather than across-the-board appreciation,” it adds. “Cap rates have averaged in the high-7% to mid-8% range during the past year.”

Earlier this year Atlanta-based Marcus & Millichap associate vice president Sonny Molloy, along with colleagues Philip Levy and Jason Vitorino, brokered the sale of a 115,396-square-foot BJ’s in Woodstock, GA for $16.05 million, or $139 a square foot.

“Because these companies are performing well, investors have a stronger interest in them and they’re having an easier time getting them financed,” Molloy says. “From a more practical standpoint, I think they perceive consumers spending more at wholesalers like BJ’s because they get more bang for their buck.”

Gill Warner, senior director of Stan Johnson Co. in Tulsa, OK, is less sanguine. While he hears the sales pitches for “recession-proof tenants,” he says he doesn’t necessarily see a significant volume in deal activity taking place. In part that’s because not many properties leased to perennial favorites like Wal-Mart and Target Corp. are ever on the market, he says. And as for dollar stores, which are much more plentiful among properties available for purchase, he says, “they’re not flying off the shelf. They’re still not priced right.”

Among Warner’s current listings is a newly built Family Dollar store. “There’s good interest, but the bid-ask gap is big,” he says. “It’s still going to sell at a market cap rate. It’s not going to sell [at a lower cap rate] just because it’s in that industry.”

Molloy sees that bid-ask gap–a gap that he says is widening as a result of the sheer amount of supply on the market–as a signal of buying opportunities. “I think there’s an opportunity to purchase dollar stores right now if you can find one with a market location that’s fundamentally sound,” he says. Dollar stores “are positioned to do very well in this environment.”

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