Bay Area Shopping Center Portfolio Highlights

On February 12, 2025, Blackstone Real Estate completed the privatization of Retail Opportunity Investments Corp. (ROIC) for $4 billion. Of the 93 grocery-anchored shopping centers in the portfolio, 18 are located within the Bay Area. These 18 Bay Area shopping centers comprise approximately 1.4 million square feet and sit on roughly 148 acres of land. The ROIC portfolio represented the fourth-largest grocery-anchored portfolio in the Bay Area, trailing only Regency, Kimco, and First Washington Realty.

According to ROIC’s year-end 2023 report, their Bay Area retail portfolio generated approximately $38 million in base rent that year, with their total portfolio producing about $238 million in base rent. Based on these figures, the sale price of $4 billion reflects an estimated cap rate of 6% across the entire portfolio.

With the information available, the estimated value of the Bay Area portfolio is approximately $633 million—equating to $452 per square foot and $4.3 million per acre. Base rent across the Bay Area portfolio averaged $2.18 per square foot.

Takeaways From the Deal

ROIC exited at fair market value, while still leaving upside potential on the table for Blackstone. Selling a grocery-anchored center at or near a 6% cap rate in the current real estate market probably favors the seller slightly more than the buyer. However, over the course of a 10-year hold, a buyer of this asset class should perform very well—if the property is managed and operated properly.

Grocery-anchored centers tend to be recession-resistant assets that hold up well, even in economic downturns. Consumers constantly visit to buy groceries, go to the bank, eat at restaurants, grab coffee, send mail, get haircuts, and take care of other daily essentials. Even by just maintaining the status quo and realizing typical 3% annual rent increases, the base rent across the Bay Area portfolio could grow from approximately $38 million today to around $50 million by 2035. With a 6% cap rate applied to $50 million, valuation is estimated at $833 million.

Grocery Center Enhancements

But Blackstone didn’t acquire ROIC just to maintain the status quo—they likely see ways to outperform it. Many Bay Area grocery-anchored landlords are increasing revenue by:

• Leasing parking lot land to EV charging companies
• Selling off excess land within shopping centers for housing or alternative uses
• Negotiating significantly higher rents when grocery leases come up for renewal

In many cases, grocery rents have been untouched for 20, 30, or even 40 years. The grocery business is more competitive than ever, and securing a quality location is difficult. Grocers often prefer long-term leases at below-market rents to keep competitors out and lock in an advantage. In land-constrained markets like the Bay Area, building a new grocery store isn’t easy as owners have to rely on current supply.

Seven out of the 18 Bay Area centers in the ROIC portfolio are occupied by Lucky or Grocery Outlet, both of which are struggling to compete with stronger players like Safeway, Raley’s, Whole Foods Market, Sprouts, H Mart, Trader Joe’s, and the emerging Nugget Markets. As these legacy leases expire, landlords are demanding market rents—in some cases, increases of 300% or more. With grocery stores occupying the largest footprints in these centers, the opportunity to reset these rents will likely allow Blackstone to push base rent well beyond the projected $50 million by 2035.