Phillips Edison's 2025 Growth Strategy: A Case for Grocery-Anchored Real Estate in a Post-Pandemic World

The post-pandemic real estate landscape has been defined by two opposing forces: the relentless shift toward e-commerce and the stubborn resilience of necessity-based retail. While many retail sectors have struggled to adapt, grocery-anchored shopping centers have emerged as a rare bright spot. Phillips Edison & Company (PECO), a national leader in this niche, is leveraging this structural advantage with a 2025 growth strategy that combines disciplined capital deployment, strategic acquisitions, and a focus on capital efficiency. For investors seeking exposure to a real estate subsector with durable demand, PECO's approach offers compelling insights.

The Grocery-Anchored Model: A Post-Pandemic Winner

Grocery-anchored retail centers have defied the broader retail slump, driven by three key factors: inherent demand for essential goods, limited new supply, and a competitive tenant landscape. As of Q4 2024, grocery-anchored vacancy rates had compressed to 3.5%, down 100 basis points from pandemic highs. This scarcity has fueled annual rent growth of 3.1%, outpacing other retail subtypes. Phillips Edison's portfolio, anchored by top-tier grocers like Kroger, Publix, and Albertsons, benefits directly from these trends.

The company's 2025 strategy hinges on acquiring high-quality, grocery-anchored assets in Sunbelt markets—regions with strong population growth and demographic tailwinds. Acquisitions like the Clayton Station (San Francisco suburb), Oak Creek Center (Columbus suburb), and Hampton Pointe (Durham suburb) exemplify this approach. These properties are not just real estate; they are nodes in a broader ecosystem of consumer activity, blending retail, healthcare, and service tenants to create destination hubs.

Capital Efficiency: PECO's Competitive Edge

What sets Phillips Edison apart is its ability to balance growth with financial discipline. As of June 30, 2025, the company had $972 million in liquidity and a trailing 12-month net debt to adjusted EBITDAre ratio of 5.4x. This is a conservative leverage profile for a REIT, particularly one operating in a capital-intensive sector. By maintaining a strong balance sheet, PECO can capitalize on acquisition opportunities without overextending its financial flexibility.

The company's capital efficiency is further amplified by its high occupancy rates and strong leasing spreads. In Q2 2025, PECO achieved a 97.4% portfolio occupancy and a 34.6% rent spread on new leases. These metrics reflect not just tenant demand but also pricing power. Grocery-anchored centers are inherently sticky: grocers pay premium rents for locations with high foot traffic, which in turn attracts ancillary tenants like pharmacies and salons. This flywheel effect creates a self-reinforcing cycle of value creation.

Strategic Acquisitions and Development: Fueling Long-Term Growth

PECO's 2025 acquisition targets are carefully selected to align with its long-term capital efficiency goals. The company has already completed $287 million in acquisitions through the first half of 2025, with a full-year target of $350–450 million. These deals are not just about scale; they're about diversification and density. For example, the acquisition of the Hampton Pointe in Durham adds a high-traffic location in a growing urban corridor, while the Clayton Station in the San Francisco Bay Area taps into a market with low retail supply and high rent growth potential.

Development is another key lever. PECO has 21 projects under construction, with estimated yields of 9–12%. These include outparcel retail spaces and redevelopments of underperforming assets. By converting underutilized land into high-demand retail formats, the company is unlocking value while avoiding the risks of greenfield development.

Investment Implications: A Buy for Income and Growth

For investors, Phillips Edison's 2025 strategy presents a rare combination of defensive qualities and growth potential. The company's focus on necessity-based retail reduces exposure to economic cycles, while its disciplined capital allocation ensures that growth is sustainable. With a dividend yield of 3.5% and a five-year dividend growth rate of 20.6%, PECO is also an attractive option for income-focused investors.

However, risks remain. Interest rates are still elevated, and rising construction costs could pressure margins. That said, PECO's 95% fixed-rate debt structure and strong liquidity position provide a buffer against these headwinds. The key will be execution: can the company maintain its high occupancy rates and leasing spreads as the market evolves?

Conclusion: A Model for Resilient Real Estate

Phillips Edison's 2025 growth strategy is a masterclass in capital efficiency. By focusing on grocery-anchored assets in high-growth markets, the company is positioning itself to benefit from structural tailwinds in retail real estate. For investors, the combination of strong financials, disciplined acquisitions, and a resilient business model makes PECO a compelling case study—and a potentially lucrative opportunity in a post-pandemic world.