The average cap rate for dollar stores has increased from 6.34% to 6.51% during the third quarter of 2023, according to a report by B+E. This rise is in line with market trends as sellers adjust pricing to accommodate financing access and keep up with Federal Reserve rate hikes.
The report notes that inflationary pressures have led to a decrease in customer purchases, particularly for essential items at dollar stores. However, non-essential products with higher profit margins are still seeing some sales volume.
Despite these challenges, B+E predicts that Dollar General and Dollar Tree will continue expanding their locations modestly during this period of economic uncertainty. Additionally, they have seen benefits from reduced ocean freight costs and an increase in customers with household incomes over $125,000.
In Q3 alone, on-market listings for single-tenant dollar stores rose by 13%, going from 477 to 538 properties available for sale or lease. This can be attributed partly due rising interest rates which have pushed independent levered buyers out of the buyer pool.
