If you’ve been following Westwood Net Lease Advisors’ blog, you are aware that triple-net (NNN) lease properties are a relatively low-risk, passive, stable, income-producing investment class. By our standards, to be considered an ideal, stress-free NNN investment, a property must have a creditworthy tenant with a reliable future, and many other factors must be present. These include but are not limited to company growth and stability, a location that suits the tenant’s needs, and a long-term, corporate-guaranteed lease.
Dollar stores meet these criteria, continue to surpass market expectations as a great investment choice, and exceed our NNN investment benchmarks, especially in the current economic climate.
Dollar Stores Offer Stable Growth in Any Economy
Not only do dollar stores thrive in a strong economy, history shows they also maintain stable growth in times of recession. Take the current state of affairs – the COVID-19 pandemic has created a government classification for these companies as “essential” and, despite a currently declining economy, they continue to increase sales, add thousands of employees, and evolve by listening to their customers and adding the products and services they need. They are also backed by investment-grade corporations more likely to ride out tough economic times, which makes dollar stores a lower-risk, stable commercial real estate investment.
75% of the US population is now within five minutes of a Dollar General store. − GlobalData Retail
Dollar General, for example, continues to increase sales within existing stores, add roughly 1,000 new locations annually, and recently built its own grocery distribution network and grocery brand, DG Fresh. With the addition of fresh and frozen foods in 16,000 stores, so far in Q2, there’s been a 28% increase in revenue. Dollar Tree sales have also increased by 8%.
If the general business cycle moves into a full-blown recession, dollar stores will likely continue adding locations and services. They have even increased their customer base – according to Forbes and NPD Group, millennials from households earning over $100,000/year bring in a quarter of dollar store sales. With instability in other investment types, a NNN dollar store property is an important investment consideration.
Dollar Tree owns Family Dollar, and when combined with Dollar General, the three brands have more retail locations than Walmart and Starbucks combined. – Retail News & Trends
Is a Dollar Store NNN Investment Truly Recession-Proof?
Though it’s impossible to say with one hundred percent certainty that dollar stores are recession-proof, records confirm growth and consistency in times of recession, and we are seeing their strength during one of the most challenging worldwide events in modern history.
As other retailers that target middle-income shoppers are losing customers and closing stores, the market for dollar stores is only getting stronger – they are becoming the sole shopping choice for many communities, even in locations where there is a Walmart and a large grocery chain.
According to the Institute for Local Self-Reliance, as of December 2018, there were close to 31,000 dollar stores in America. “That’s more locations than the combined number of Walmart, Kroger, Costco, Home Depot, CVS, and Walgreens stores – the country’s six biggest brick-and-mortar retailers,” reports Forbes.
As for too many physical locations, dollar stores have discovered that by spacing their stores out strategically (sometimes just a few miles apart) they can build customer loyalty without cannibalizing other nearby stores. Their “branded” locations are strategically placed with solid demographics. It is no coincidence that they are near residents who need their products and like the convenience of a dollar store being close to their bank, pharmacy, and gas station.
Dollar stores are a perfect fit for the three main end-goals of a NNN investor:
#1 – passive income from anywhere in the country.
#2 – reliability for the preservation of equity.
#3 – long-term financial gain and lifestyle freedom.
To Wrap it Up – In an Uncertain Economy, You Can Still Invest Wisely with Dollar Stores
Dollar stores continue to pop up all over the U.S.; they are wooing more shoppers with a bigger selection of products and services, price, convenience, reliability, and the ability for shoppers to stop and get something right now. They are also considered a safe, economic choice as consumers navigate the COVID-19 situation and realize tighter financial constraints.
If you want to invest but you’re fearful of the market’s instability, Westwood Net Lease Advisors is here for you. We are confident you can invest safely and wisely in a NNN lease dollar store property. Banks are still lending for essential businesses and with dollar stores, especially Dollar General, the opportunity exists for reliable returns, up to 15 years+ of guaranteed income, no landlord responsibility, capital-preserving tax benefits, and more.
We know you have questions about prior, current, and future NNN opportunities – we are here to offer perspective and advice, at no charge. Contact us today for a no-obligation consultation, 314-997-5227.
