The average cap rate for dollar stores has increased from 6.34% to 6.51% in the third quarter of 2023, according to B+E’s report. This rise is in line with market trends as sellers adjust pricing to accommodate financing 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. As a result, non-essential products with higher profit margins are seeing less 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, the reduction in ocean freight costs and an increase in customers with household incomes over $125,000 have benefited dollar stores.
In Q3 alone, on-market listings for single-tenant dollar stores saw a 13% increase from 477 to 538 properties available for sale or lease. This can be attributed to rising interest rates which may be pushing independent levered buyers out of the buyer pool.
