Although the federal funds rate has remained the same since the third quarter of 2023, dollar stores’ average cap rate increased from 6.34% to 6.51% during Q3, or 17 basis points, B+E reports. This rise is well aligned with market norms, as sellers recalibrate pricing to facilitate financing access and keep pace with Federal Reserve rate hikes, the company says in its report on the dollar store sector. 

“In response to inflationary pressures, dollar stores are experiencing a decrease in customer purchases, particularly for essential items,” the report states. “Non-essential products, which produce higher profit margins, are experiencing less sales volume.”  

Although profit margin pressures will likely continue during economic uncertainty, B+E predicts that Dollar General and Dollar Tree will likely ride out the inflationary period and continue modestly expanding location count. “Moreover, dollar stores have benefitted from a reduction in ocean freight costs and an increased customer base with household incomes over $125,000,” according to the report. 

On-market listings for single-tenant dollar stores increased 13% in Q3 from 477 to 538. This can be attributed to rising interest rates, pushing independent levered buyers out of the buyer pool.  

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