Perhaps as a result, the Sun Belt over the last four years has seen population growth that’s bringing new opportunities for retailers.

As of 2022, 12 of the 15 fastest growing cities were in the Sun Belt, loosely defined as the Southeastern and Southwestern United States. From April 2020 through July of last year, the South’s population grew by 3.9 million people, according to Census data, with cities in Florida, Georgia, and Texas seeing some of the largest population spikes.

What has followed is massive growth in demand for retail real estate with 13% less space available in Sun Belt states compared to the national average, according to JLL. The top eight markets with the highest population growth between mid-2022 and mid-2023 were all located in the Sun Belt.

“The numbers that we open up have to be successful, so we’re going to place our efforts where we have the highest chance of success,” Naveen Jaggi, JLL’s president of retail advisory services. “[The] highest chance of success is seasonal weather, which is outdoor, livable, and livable for nine, 10 months of the year. And the Sun Belt area does that.”

Southern hospitality

Americans shop at grocery-anchored shopping centers more than anywhere else, including malls, mixed-use, etc., Jaggi explained. In other words, retailers want to be near grocery stores, which tend to see more foot traffic than other retail centers.

Aldi recently announced plans to open 800 new stores by the end of 2028. But in the Southeast specifically, the company plans to convert a number of Winn-Dixie and Harveys Supermarkets locations in Alabama, Florida, Georgia, Louisiana, and Mississippi after closing on its acquisition of parent company Southeastern Grocers. The company said since announcing its acquisition last August, it’s seen a more than 20% bump in traffic at Florida Aldi stores.

According to market research firm Dunnhumby, the company’s expansion in the South could eat into established competition in markets such as Florida, CNBC noted.

Florida-based grocery chain Publix isn’t slacking on new storefronts either. Publix has not only recently expanded in its home state but has also entered new markets such as Kentucky and Virginia and grown its footprint in states such as Tennessee and Georgia.

“If you go to [a] Kroger, Albertsons, HEB, or Publix-anchored shopping center, in that shopping center, you’re going to find daily needs…[food and beverage] concepts, as well as some soft goods that all be in the same place,” Jaggi said. “Recognizing where people want to go more frequently—that’s where retailers want to congregate.”

Zoom out

The Sun Belt population wave actually predates the pandemic, which only ramped it up thanks to the flexibility of working from home. As we previously reported, work from home policies have affected retail activity in cities such as San Francisco.

• However, JLL data has found that office growth broadly is slowing down but still favors the Sun Belt due to lower costs. In Q3 2023, more than half of announced relocations were in Dallas-Fort Worth, Florida, and Charlotte.
• A CBRE survey of commercial real estate investors found that Dallas, Miami, Raleigh, Atlanta, and Nashville were the most preferred markets to move into.

“Mixed-use is a very attractive asset class, but they’re very complex asset classes because you’re mixing an office, residential, as well as retail,” Jaggi said. “As a result, you have a limited pool of buyers relative to the much larger pool of investors that would buy a grocery-anchored shopping center.”

This report was initially published by Retail Brew.