March 21, 2022

Net Lease Investors are Poised to Benefit from ALDI's Big Expansion Plans

Discount grocer ALDI has been on an expansion tear as of late⁠—and that’s creating big opportunities for net lease investors.

“With its long-term leases in the 15- to 20-year range, zero landlord responsibilities, typical 5.0 percent rent increases every five years, and well-located real estate, ALDI has become extremely attractive to net lease investors,” says Tom Georges, a Vice President in Northmarq's New York office. “With its rapid expansion, there are significant opportunities for investors to acquire newly built ALDI-tenanted properties. Just as a dollar store can enter a market that a Walmart or other big-box retailer cannot, due to lower population density, ALDI can be successful because of its smaller format and low-cost business model.”

ALDI stores are typically under 20,000 square feet, allowing the brand to serve markets that its competitors can’t with fewer employees. The chain is one of the most in-demand brands within the single-tenant net lease sector, particularly amid materials and labor shortages.

For investors, “the grocery sector is driving significant demand,” Georges says. “Grocery leased assets are highly sought-after properties for commercial real estate investors – not only do most customers still prefer to shop in person or have their online orders fulfilled by curbside pick-up, but grocery anchors help drive foot traffic to other inline retailers. Across the country, we’ve seen freestanding, single-tenant grocery stores as well as grocery-anchored shopping centers become very desirable portfolio additions.”

European-born ALDI currently boasts more than 2,150 stores in 38 states and is America’s fastest growing retailer across any sector. Its expansion plans put it among the largest brands by store count, according to Georges, exceeding Ahold Delhaize’s (Food Lion, Stop & Shop and Hannaford) 1,029 U.S. locations, and quickly approaching Albertsons Cos. Inc. and The Kroger Company store counts, which are 2,260 and 2,800 respectively.

Twenty states will see ALDI stores openings in the near future with Chicago, Illinois and the Gulf Coast region the most active.

“ALDI is a price-driven brand which attracts the value conscious consumer. Furthermore, with their unique brands and quirky characteristics, they’ve amassed a loyal following, with consumers in underserved markets hoping for a grand opening announcement,” Georges says. “In addition to wanting to serve their customer base, another driving factor in ALDI’s rapid expansion is looming competition from Lidl, another European grocer who’s announced expansion plans for U.S. markets. While Lidl’s ramp up hasn’t been as fast as originally predicted, ALDI hasn’t slowed down.”