It's a question we hear often from advisors right now: with rates stuck, oil repriced by conflict in the Middle East, and years of cumulative food inflation behind us, what does that mean for grocery-anchored retail? It's a fair question, and this issue is an attempt to answer it plainly — not with a pitch, but with context: what's happening in the broader economy right now, why grocery spending tends to behave differently from other categories when conditions get uncertain, and how some of the grocers we underwrite behind as anchors — with a closer look at Food Lion — are actually performing as businesses today.
The Macro Backdrop
- The Fed has held its policy rate at 3.50%–3.75% across five consecutive meetings; futures markets are now pricing some probability of a hike rather than a cut, under new Chairman Kevin Warsh.¹
- Brent crude is trading near $94–97 per barrel, up roughly 39% from a year ago, driven by disruption tied to the Strait of Hormuz and the ongoing conflict involving Iran. Energy costs of this kind flow into freight, refrigeration, and household budgets alike.²
- Food-at-home costs are up more than 30% on a cumulative basis since early 2020, and private-label penetration across the grocery industry is up roughly 30% since 2021 — a sign that a meaningful share of shoppers have shifted purchasing habits toward value and stayed there rather than reverting.³
- Unemployment has stayed relatively low even as broader economic growth has slowed, which matters for grocery spending specifically: household budgets under pressure tend to get reallocated away from discretionary categories first, with grocery spending among the last line items to be cut.⁴
Why Grocery Spending Tends to Behave Differently
None of the conditions above are unique to grocery-anchored retail — rate uncertainty, energy costs, and inflation touch every part of the economy. What's specific to groceries is how consumers respond to those conditions. Food is a recurring, non-discretionary household expense, and when a family's budget tightens, the adjustment tends to show up first in categories like dining out, travel, and discretionary retail — not in the weekly grocery trip.
That pattern showed up clearly during the Great Recession, when household grocery spending held up even as broader consumer spending pulled back, and again during COVID-19, when at-home food preparation increased as dining out became less available. The current inflationary period has produced a related but distinct behavior: rather than cutting grocery spending outright, a large share of shoppers have shifted which grocers and which products they buy — toward private label, toward value-positioned chains, and toward stores where they trust the price. That shift is a big part of why the operating performance of specific grocers — not just the category as a whole — is worth understanding on its own terms.⁴
How Some of Our Potential Anchors Are Performing
SouthStar underwrites shopping centers behind a range of grocery operators across the Southeast and Mid-Atlantic, not a single banner. Several of the businesses behind those banners report their results publicly; others — Publix, Lowes Foods, and Food City among them — are employee- or family-owned and do not disclose quarterly financials. Where public results exist, they give a useful, fact-based picture of how each business is actually running today — distinct from, and not a substitute for, the performance of any real estate investment. A few figures and facts from each company's most recent public disclosures:⁵
| Grocer | Recent Operating Signal | Notes |
|---|---|---|
| Food Lion (Ahold Delhaize) | 53rd consecutive quarter of comparable sales growth; online sales up more than 20% in Q2 2026 | See spotlight below |
| Harris Teeter (The Kroger Co.) | Kroger e-commerce sales up 19%; “Our Brands” private-label products made up roughly 30% of private-label unit sales | Reflects Kroger's most recently reported quarter as of this writing |
| Walmart (incl. Neighborhood Market) | Revenue of $187.9 billion for the quarter; US comparable sales up 2.6%; full-year sales guidance maintained | Walmart's fiscal quarter runs on an offset calendar |
| Publix | Employee-owned; does not report quarterly financials | Continues to operate and expand across the Southeast |
| Lowes Foods (Alex Lee) | Family-owned; does not report quarterly financials | Winston-Salem, NC-based; more than 80 stores across NC, SC, and GA, with continued expansion into South Carolina |
| Food City (K-VA-T Food Stores) | Family- and employee-owned (ESOP); does not report quarterly financials | Abingdon, VA-based; more than 135 stores across VA, TN, KY, GA, and AL, with an ongoing store-renovation program |
| Aldi / Lidl / Ingles Markets | Aldi opened 180 new US stores in 2025 as part of its continued expansion | Ingles Markets is a family-operated regional grocer based in the Southeast |
Spotlight: Food Lion
Food Lion is one of the anchors we underwrite behind most often, and its recent operating results are worth a closer look — not as a prediction of what any real estate investment tied to it would return, but as a picture of how the retailer itself is running.
A long streak of comparable sales growth
In its most recent reporting, Food Lion's parent company, Ahold Delhaize, disclosed that Food Lion had posted its 53rd consecutive quarter of comparable sales growth — a streak that covers the full 2021–2025 inflationary period. Comparable sales measure revenue growth at stores open for at least a year, so this figure reflects ongoing demand at existing locations rather than growth from new store openings.⁵
Investment in stores and digital
Food Lion is in the middle of a remodel program covering 93 stores in its Greensboro, North Carolina market, and its online sales grew more than 20% in the second quarter of 2026 as part of a company-wide digital platform rollout across Ahold Delhaize's US banners. Ahold Delhaize has also announced a multi-year, roughly $1 billion US price-investment program running through 2028, funded through the company's broader cost-efficiency initiatives.⁵
Private label and pricing position
Own-brand products made up more than 40% of Ahold Delhaize's group sales in the second quarter of 2026, giving Food Lion room to invest in price without the same margin pressure a retailer with less private-label penetration might face.⁵
Headwinds, stated plainly
Food Lion's results have not been without pressure. Ahold Delhaize disclosed that reduced SNAP benefits, changes to pharmacy pricing under the Inflation Reduction Act, and deflation in egg prices together reduced comparable sales growth by an estimated 1.6 to 1.9 percentage points in recent quarters, and US operating margin declined by 20 basis points on price investment and higher costs. We think it's worth including that context rather than only the favorable figures.⁵
Not All Grocery Anchors Occupy the Same Position
One nuance worth flagging for advisors evaluating this space: grocery operators are not all positioned the same way today. Research from JLL describes a bifurcation in the industry — value-focused and fresh-format grocers gaining traffic and share, while conventional mid-tier chains see comparatively flat results. In the Southeast and Mid-Atlantic specifically, that shows up in a mix of operators across different competitive positions: Food Lion and Aldi/Lidl on the deep-value end, Harris Teeter and fresh-format grocers on the quality-value end, Walmart Neighborhood Market and Publix each occupying their own position through scale or service, and family- or employee-owned regionals like Lowes Foods and Food City competing on local relationships and store-level familiarity in their core markets. Understanding which position a given anchor occupies is part of how we evaluate a shopping center, alongside trade area, lease structure, and the physical condition of the asset.³
What This Means for How We Think About Deals
None of this tells us which specific asset to underwrite — that still comes down to trade area, anchor health, and lease structure, deal by deal. But understanding the operating position of an anchor — whether it's actively investing in stores and digital, how its pricing strategy is trending, and what headwinds it's managing — is part of the underwriting process before a shopping center is ever put under contract. It's also part of why, when the numbers support it, we've tended to favor acquiring without leverage rather than financing at the deal level: it keeps a given asset's basis from being affected by where interest rates happen to be at closing. That's an approach we favor when it fits the deal, not a fixed rule, and debt still has a role in the portfolio, typically applied later and at the pool level once a group of assets is in place.
Grocery spending tends to hold up differently than other categories when conditions get uncertain, and the operators behind our potential anchors are, by their own disclosures, continuing to invest in stores, digital, and price — context worth having regardless of which sponsor or structure an advisor is evaluating.
Index & REIT Performance
Every issue of this series will close with the same table below, updated to the most recent common date across sources. Public market indices update in real time; NCREIF, the private appraisal-based benchmark, reports roughly three to four weeks after quarter-end. All figures below are as of or through June 30, 2026, the most recent calendar quarter-end, except where separately noted. This data describes third-party market indices and publicly traded companies unaffiliated with SouthStar — it is not, and should not be read as, an indication of the performance of any SouthStar-sponsored vehicle.⁶
| Index / Security | YTD | 1-Year | 3-Year (Ann.) | 5-Year (Ann.) | Current Yield |
|---|---|---|---|---|---|
| Broad Market & Bonds — as of June 30, 2026 | |||||
| S&P 500 | 10.21% | 22.32% | 20.61% | 13.41% | 1.03% |
| Bloomberg US Aggregate Bond Index (formerly Lehman Aggregate) | 0.62% | 7.30%¹ | ~2.5%¹ | -0.36%¹ | 4.88%¹ |
| Public Real Estate — Grocery-Anchored Proxy — as of June 30, 2026 | |||||
| FTSE Nareit All Equity REITs (broad) | 14.90% | 15.43% | 10.06% | 3.71% | 3.66% |
| Private Real Estate — Grocery-Anchored Proxy (NCREIF, all-property) — as of Q2 2026 | |||||
| NCREIF Property Index (NPI), all-property¹ | 2.75% | 4.46% | -0.63% | 2.71% | |
| Publicly Traded Grocery-Anchored REITs — as of June 30, 2026 | |||||
| Kimco Realty (KIM) | 27.82% | 26.22% | 14.02% | 8.63% | 4.10% |
| Federal Realty (FRT) | 25.18% | 35.91% | 12.85% | 5.21% | 3.66% |
| Brixmor Property Group (BRX) | 22.99% | 26.55% | 17.94% | 11.42% | 3.90% |
| Acadia Realty Trust (AKR) | 3.85% | 17.14% | 17.85% | 3.17% | 3.83% |
| Regency Centers (REG) | 17.73% | 16.49% | 13.32% | 8.74% | 3.79% |
| Phillips Edison & Co. (PECO) | 19.00% | 23.09% | 10.61% | n/a³ | 3.12% |
¹ NCREIF Property Index (NPI), all-property, as provided by SouthStar's institutional contacts (Opco); a directly comparable NCREIF current-yield figure was not provided and is left blank pending that data.
² Bloomberg US Aggregate Bond Index figures above (1-year, 3-year, 5-year, yield) are average annual total returns per fund prospectus data and S&P Global's comparable Aggregate index: 1-year is trailing 12 months ended March 31, 2026; 5-year is the 60 months ended December 31, 2025; 3-year is interpolated from those two figures and has not been separately confirmed; yield is yield-to-worst as of July 21, 2026. None of the four bond figures is dated precisely to June 30, 2026.
³ Phillips Edison completed its IPO in 2021; a 5-year return is not yet available.
Private Investment Benchmarks (Cambridge Associates) — As of March 31, 2026
Cambridge Associates is broken out separately rather than folded into the table above, and its as-of date is different on purpose: its data is arguably the most comparable to a private real estate investment of anything in this report — it's constructed the same way private fund returns are, from reported valuations and cash flows rather than a daily-traded share price. That same construction is what causes it to report on a lag of roughly one full quarter, so as of this issue, the most recent available Cambridge Associates period is the quarter ended March 31, 2026, not June 30.
One additional constraint: Cambridge Associates' benchmark reports are licensed, confidential data — their own terms prohibit reproduction or redistribution without written permission, even in summary form. We are not a licensed redistributor, so we can't publish their specific index figures here. If SouthStar or a reader has its own Cambridge Associates access, the real estate benchmark (YTD, 1-, 3-, and 5-year, net to limited partners) as of March 31, 2026 is the figure to pull directly from their platform for a true apples-to-apples private comparison; we've left the structure below for that purpose.
| Index / Security | YTD | 1-Year | 3-Year (Ann.) | 5-Year (Ann.) | Current Yield |
|---|---|---|---|---|---|
| Cambridge Associates U.S. Real Estate Index (net to LPs) | Licensed data† | Licensed data† | Licensed data† | Licensed data† | n/a |
† Cambridge Associates' benchmark reports are confidential, licensed data; their terms prohibit reproduction or redistribution without written permission. Figures are not published here for that reason, not because they are unavailable — SouthStar or a reader with direct Cambridge Associates access can pull the real estate benchmark as of March 31, 2026 for a true private-to-private comparison.
This material is for informational and educational purposes only and does not constitute an offer to sell, or a solicitation of an offer to buy, any security or investment product, in any jurisdiction. Nothing contained herein constitutes investment, legal, tax, or accounting advice, nor a recommendation to buy, sell, or hold any security, index, fund, or asset class. No specific recommendations are intended, and nothing in this material should be relied upon as the basis for any investment decision. Any offer or solicitation of an investment in a SouthStar-sponsored vehicle will be made only by means of a confidential private placement memorandum to qualified investors, which will contain a complete description of the investment, its terms, and associated risk factors; prospective investors should review any such memorandum in its entirety and consult their own legal, tax, and financial advisors before making any investment decision. This material contains no representations or predictions regarding the historical or future investment performance of any asset class, index, or SouthStar-sponsored vehicle, and nothing in it should be construed as such. Investing involves risk, including possible loss of principal, and past performance of any index, security, or asset class is not indicative of future results. The index and REIT data referenced herein describe third-party public and private benchmarks and publicly traded companies unaffiliated with SouthStar; it is included for general market and educational context only, is not indicative of the performance of any SouthStar-sponsored vehicle, has not been independently verified by SouthStar, and should not be relied upon in connection with any investment decision. Data regarding third-party companies and indices throughout this material is drawn from public disclosures and third-party sources believed to be reliable but not guaranteed as to accuracy or completeness; sources for each figure are listed below.
- 1.Federal Reserve Board, FOMC statements and minutes (June–July 2026).
- 2.U.S. Energy Information Administration, Short-Term Energy Outlook (August 2026); Reuters and CNBC oil market coverage (June–August 2026).
- 3.JLL, “Grocery Tracker 2026”; industry private-label penetration data as cited in JLL Grocery Tracker 2026.
- 4.VAC Development and third-party consumer-behavior research on household grocery spending during the Great Recession, COVID-19, and the 2021–2022 inflationary period.
- 5.Koninklijke Ahold Delhaize N.V., Q2 2026 earnings release (period ended June 2026); The Kroger Co., fiscal Q1 2026 earnings release (reported June 18, 2026, most recent as of this writing); Walmart Inc., Q2 FY2027 earnings release (period ended July 31, 2026, reported August 20, 2026); Alex Lee Inc. and Lowes Foods LLC company disclosures and press materials; K-VA-T Food Stores, Inc. (Food City) company disclosures and press materials.
- 6.Nareit, “REITWatch” (July 2026 edition, data as of June 30, 2026) — S&P 500, FTSE Nareit All Equity REITs, FTSE Nareit Shopping Centers subsector, and individual REIT (Kimco Realty, Federal Realty, Brixmor Property Group, Acadia Realty Trust, Regency Centers, Phillips Edison & Company) total return and dividend yield data all drawn from this single official Nareit publication for internal consistency; Fidelity Investments quarterly fund review and SEC-filed fund prospectus average annual total return data citing the Bloomberg US Aggregate Bond Index, formerly the Lehman Brothers Aggregate Bond Index; S&P Global, “S&P U.S. Aggregate Bond Index” (yield-to-worst); NCREIF Property Index (NPI), all-property YTD/1-/3-/5-year returns as provided by Oppenheimer & Co. (Opco); Cambridge Associates private investment and real assets benchmarking methodology.