Introduction and ContextThe case study, conducted by RCLCO, examines the effect of grocery store anchors on multifamily rental properties. It addresses a common land use issue where low-density grocery stores, often built in central locations, are being transformed into higher-value mixed-use developments that include ground-floor grocery stores and multifamily communities. This transformation is driven by the need to densify urban and suburban areas while optimizing land use.Methodology and Key FindingsThe study analyzed 64 case study properties with ground-floor premium grocers, including Whole Foods, Trader Joe’s, and other premium grocers like Sprouts Farmers Market and Harris Teeter. For each case study, RCLCO selected nearby comparable properties that were similar in age, scale, type of construction, and market positioning. The rents of these comparable properties were adjusted to control for differences in size, location quality, in-unit finishes, and community amenities. This methodology allowed for an apples-to-apples comparison, revealing that the presence of a ground-floor premium grocer typically results in meaningful rent premiums. On average, properties with a grocery store anchor command a 6.2% rent premium compared to similar properties without such an anchor.Rental Premiums and Rent GrowthThe analysis showed that the rent premiums vary by the type of grocer. Whole Foods, for example, tends to drive the strongest apartment performance, with higher rent premiums and enhanced absorption rates. The study also investigated the relationship between rent premiums and rent growth, finding that properties with ground-floor premium grocers experienced higher rent growth during stable market conditions in 2018 and 2019. This indicates that the premium conferred by a ground-floor retailer not only results in higher initial rents but also in sustained rent growth over time.Absorption Pace and Market PerformanceThe case study further examined the lease-up performance of these properties, comparing their actual capture rate of submarket net absorption with their expected “fair share.” Properties with ground-floor premium grocers were found to outperform the submarket, capturing more units than their fair share. This accelerated absorption rate underscores the competitive advantages these mixed-use developments gain over nearby competitors, making them more attractive to renters and investors alike. The findings suggest that incorporating a grocery store anchor into multifamily developments is a strategic move that can enhance both the financial performance and the appeal of these properties....