Necessity begets stability

The case for grocery-anchored real estate investing

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Necessity begets stability

The case for grocery-anchored real estate investing

By IN research and Phillips Edison — October 9, 2018

Coming out of the financial crisis, advisers could only dream of a nine-year bull market. Its reality now keeps most up at night.

The equity market's current run is one of its longest in history. It's also one of the strongest, with the S&P 500 Index up more than 300% from its 2008 nadir.1 Heady returns have placed stock valuations in the highest echelon of historical ranges, leaving experts pondering when the market cycle will take its next natural turn.

Against this backdrop, advisers are searching for downside protection and stability within clients' portfolios while also generating and growing the income that investors need for their retirement. The search is challenging. Historically low bond yields suggest fixed income will provide little protection against the next downturn for stocks. Other asset valuations are also elevated.

The search for stability must press on, however. Large swaths of the population are at critical tipping points in their investment journeys. Baby boomers can't afford to see their savings wiped out as they leave the workforce. This generation needs to preserve capital and find stable sources of retirement income. Low bond yields make their needs harder to address. Bonds also lack the tax efficiency and growth of investments in real estate.

Millennials, meanwhile, are in the nascent stages of investing. An early downturn could discourage young investors, pushing them to the sidelines before the next rebound and leaving their nest eggs in a perpetual state of catch-up, magnified by the fact that we are living longer in retirement.

While long-term investors should maintain allocations to assets that can weather a market downturn – or even grow through it – the current climate makes the need more pressing and the search more difficult. Advisers may still find durable investment opportunities, however, by considering clients' most basic needs.

One potential solution is grocery-anchored real estate investment options. In our white paper, we explore this topic in more detail, but key takeaways and noteworthy considerations for advisers include:

  1. Low bond yields and stretched equity valuations underscore the need for stability within client portfolios.
  2. Baby boomers and millennials are at investment crossroads that make stability even more paramount.
  3. Grocery store revenues have proven resilient through economic cycles, even growing during recessions.
  4. Grocery-anchored REITs provide steady, moderately growing income for investors, in large part because of the necessity-based nature of grocers and other retailers within the properties.



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