Phillips Edison & Company, Inc. (PECO): 5 FORCES Analysis [Nov-2025 Updated]

You're assessing a company in late 2025, trying to map out its true competitive standing amidst inflation and shifting consumer habits, and frankly, you need to know if the current stock price reflects reality. As an analyst who's spent two decades mapping these landscapes, I see Phillips Edison & Company, Inc. (PECO) has executed a sharp defensive play by focusing purely on necessity-based retail, which is currently translating into serious pricing power. This isn't theoretical; their Q3 2025 comparable renewal rent spreads hit a record 23.2%, supported by anchor occupancy holding steady at 99.2%, even as capital suppliers present elevated costs. Still, with $977 million in liquidity, PECO seems well-equipped to manage supplier leverage while outperforming rivals with a same-center leased occupancy of 97.9%. To get the full picture of this defensive strength-how they handle big competitors, the low threat of substitutes like e-commerce, and the high barriers for new entrants-you need to see the detailed breakdown of all five forces right here.

Phillips Edison & Company, Inc. (PECO) - Porter's Five Forces: Bargaining power of suppliers

You're looking at the cost side of the equation for Phillips Edison & Company, Inc. (PECO), specifically how much leverage their various suppliers have over the business as of late 2025. For a real estate investment trust (REIT) focused on necessity retail, suppliers fall into a few key buckets: construction/development partners, capital providers (lenders/investors), and operational service providers like maintenance crews and utilities.

Construction costs are definitely elevated, which directly impacts the capital allocated to growth projects. Phillips Edison & Company, Inc. (PECO) currently has 22 projects under active construction, representing a total investment of $75.9 million in active redevelopments, all while targeting average yields between 9% to 12% on those projects. This level of ongoing capital deployment means construction vendors have some leverage, but the company's strong balance sheet helps offset some of that pressure.

Capital suppliers' power is significantly mitigated by Phillips Edison & Company, Inc. (PECO)'s strong liquidity position. As of the third quarter of 2025, the company reported liquidity of $977 million, which provides a substantial cushion for operations and selective acquisitions without immediate reliance on debt markets. This financial strength means lenders have less ability to dictate terms for new capital needs.

The power of debt-market suppliers-the providers of financing-is further limited by Phillips Edison & Company, Inc. (PECO)'s proactive debt management. As of September 30, 2025, a massive 95.3% of the Company's total debt was fixed-rate debt. This structure effectively locks in financing costs, insulating the company from immediate, sharp increases in interest rates from debt-market suppliers.

Specialized maintenance and utility providers have moderate power. Their services are non-substitutable for maintaining the high operational standards Phillips Edison & Company, Inc. (PECO) achieves, evidenced by its portfolio leased occupancy of 97.6% at quarter-end. However, the company's focus on necessity-based tenants, which generate predictable cash flow, likely gives them better negotiating leverage than a landlord with more volatile tenants.

Here's a quick look at the key financial metrics that speak directly to how Phillips Edison & Company, Inc. (PECO) manages supplier power:

The operational stability Phillips Edison & Company, Inc. (PECO) maintains suggests that while some specialized suppliers hold sway, the overall business strength limits their ability to extract excessive value. You can see this strength reflected in their leasing success:

• Portfolio comparable renewal rent spreads hit a record-high of 23.2% in the quarter.
• Comparable new leases executed showed a rent spread of 24.5%.
• Average annual rent bumps on executed deals were approximately 2.6%.
• Portfolio retention remained strong at 93.9% for the quarter.

These leasing metrics show that Phillips Edison & Company, Inc. (PECO) is successfully pushing revenue growth, which is the best defense against supplier cost inflation. Finance: draft 13-week cash view by Friday.

Phillips Edison & Company, Inc. (PECO) - Porter's Five Forces: Bargaining power of customers

Customer power for Phillips Edison & Company, Inc. is low, directly stemming from sustained, record-high demand for its grocery-anchored neighborhood shopping center space. This market dynamic translates into significant pricing leverage for Phillips Edison & Company, Inc. over its tenants.

The strength of this position is clearly visible in the leasing metrics from the third quarter of 2025. For instance, comparable renewal rent spreads hit a record-high of 23.2% during Q3 2025, which is a clear demonstration of Phillips Edison & Company, Inc.'s strong pricing power when negotiating with existing tenants. Furthermore, comparable new leases executed during the same period achieved a rent spread of 24.5%.

Anchor occupancy remains exceptionally tight. As of September 30, 2025, leased anchor occupancy stood at 99.2%. This near-perfect occupancy level for the primary grocers-the anchors-means that tenants like Kroger and Publix have very little leverage to dictate unfavorable lease terms, as the alternative of finding comparable, high-quality, grocery-anchored space is extremely limited.

The stability of the tenant base also limits customer power. Necessity-based retail tenants, which form the core of the Phillips Edison & Company, Inc. portfolio, inherently face high switching costs. These costs are amplified because these businesses rely heavily on established local customer bases that are tied to the specific location within the shopping center, making relocation disruptive and costly.

This tenant stickiness is reflected in the high renewal rates. Portfolio retention remained strong at 93.9% in Q3 2025. This figure, alongside the neighbor retention rate of 94%, shows tenants are choosing to stay and accept higher rents rather than leave.

Here's a quick look at the key operational metrics from Q3 2025 that underscore this low customer bargaining power:

The operational performance supports the view that tenants have limited options:

• Same-center leased portfolio occupancy was 97.9%.
• Same-center leased inline occupancy was 95.0%.
• Tenant improvement spend per square foot for renewals was $1, yielding a 23.3% renewal spread.
• Core FFO per diluted share for the quarter was $0.65.

Phillips Edison & Company, Inc. (PECO) - Porter's Five Forces: Competitive rivalry

You're looking at the competitive landscape for Phillips Edison & Company, Inc. (PECO) right now, late in 2025, and the rivalry is definitely present. The space is populated by large, well-capitalized REITs that are major players in grocery-anchored retail, like Regency Centers and Kimco Realty. These firms have significant scale and deep pockets, meaning competition for premier assets and top-tier tenants is fierce. Still, the underlying sector fundamentals are incredibly strong, which helps everyone operating in this niche.

The sector itself is showing remarkable health. As of the end of 2024, the national vacancy rate for grocery-anchored retail was near historic lows at 3.5%. This tight supply environment means that when space does open up, the competition to secure it is intense, but it also provides significant pricing power for landlords like Phillips Edison & Company, Inc. (PECO).

Phillips Edison & Company, Inc. (PECO) is clearly outperforming against some of the general peer metrics, which is what you want to see from a management team. As of September 30, 2025, Phillips Edison & Company, Inc. (PECO) maintained a same-center leased occupancy of 97.9%. That level of occupancy suggests excellent tenant retention and strong leasing velocity, even with the competitive pressure from other REITs.

The company's scale provides a solid base for competing in this fragmented market. Phillips Edison & Company, Inc. (PECO)'s wholly-owned property count stood at 303 properties as of September 30, 2025, spanning 31 states. While this provides necessary scale, the broader market remains geographically fragmented, meaning local market knowledge and execution are still key differentiators against national giants.

Internal growth remains a key driver, reflecting successful execution in a competitive leasing environment. The midpoint of Phillips Edison & Company, Inc. (PECO)'s full-year 2025 same-center Net Operating Income (NOI) growth guidance reflects a year-over-year increase of 3.35%. This growth is underpinned by strong leasing spreads reported throughout the year.

Here's a quick look at how some of Phillips Edison & Company, Inc. (PECO)'s key operational metrics stacked up as of the end of the third quarter of 2025:

The strength of the tenant base directly impacts rivalry by reducing turnover risk. You can see this focus on necessity retail in their top anchors:

• Kroger
• Publix
• Albertsons
• Ahold Delhaize

Also, the leasing momentum shows pricing power, which is a direct counter to competitive pressures. For instance, comparable renewal leases executed during the third quarter of 2025 achieved a record-high rent spread of 23.2%. That kind of spread generation suggests that even with strong rivals, Phillips Edison & Company, Inc. (PECO) is commanding premium rents upon renewal.

Finance: draft a competitive positioning memo comparing Q3 2025 occupancy vs. Kimco Realty and Regency Centers by next Tuesday.

Phillips Edison & Company, Inc. (PECO) - Porter's Five Forces: Threat of substitutes

You're looking at the digital shift, and honestly, pure-play e-commerce definitely presents a theoretical threat to physical retail. But for Phillips Edison & Company, Inc. (PECO), the threat is heavily mitigated because their grocery anchors are essential for the very fulfillment methods that online players rely on. We see this in the numbers: U.S. click-and-collect retail sales, which includes Buy Online, Pick Up In-Store (BOPIS), are projected to hit $154.3 billion in 2025, representing a 16.2% year-over-year increase. Furthermore, up to 78.7% of those click-and-collect sales are grocery items. This means PECO's centers are not just competing with e-commerce; they are functioning as critical nodes for last-mile logistics, which is a huge advantage.

Alternative formats like enclosed malls or traditional power centers are far more substitutable because they often rely on discretionary spending. PECO's focus, however, is necessity-based retail. Over 70% of Phillips Edison & Company, Inc. (PECO)'s rental income comes from necessity-based tenants-think grocery stores and pharmacies-whose demand remains stable even when consumers tighten their belts. This defensive positioning makes their asset class inherently less susceptible to substitution by purely digital alternatives.

The validation for this necessity focus is clear in the performance metrics Phillips Edison & Company, Inc. (PECO) reported through the third quarter of 2025. While the prompt mentioned a nearly 16% jump in grocery sales, the broader U.S. retail food sector saw sales increase 3.9% year-over-year in June 2025 compared to June 2024, reaching $720.1 billion. More specifically to the digital adoption that validates the physical necessity, U.S. online grocery sales reached $11.6 billion in October 2025, up 10.5% year-over-year. For Phillips Edison & Company, Inc. (PECO) itself, the core asset class strength is reflected in their leasing performance and occupancy, showing tenants value the physical locations.

Here's a quick look at how Phillips Edison & Company, Inc. (PECO)'s operational metrics stacked up as of the end of Q3 2025, which really shows why substitution risk is low:

Substitution risk remains low because the physical grocery center is the essential hub for last-mile logistics, especially for the Pickup fulfillment method. While Delivery sales grew 30% year-over-year in August 2025 and captured 45% of total eGrocery sales, the Pickup segment actually contracted by 4% year-over-year that same month. This suggests that while consumers use digital ordering, the physical act of picking up-which happens at centers like those owned by Phillips Edison & Company, Inc. (PECO)-is still a primary, convenient option. To be fair, 77% of consumers use BOPIS primarily so they can see an item before taking it home, confirming the continued necessity of the physical touchpoint.

• 73% of retail shoppers engage across multiple channels before purchasing.
• 44% of click-and-collect customers buy additional items during pickups.
• Phillips Edison & Company, Inc. (PECO) has 85% of its tenants with low tariff risk exposure.
• Phillips Edison & Company, Inc. (PECO) expects full-year 2025 Nareit FFO per share growth at the midpoint of 6.8%.

Finance: draft 13-week cash view by Friday.

Phillips Edison & Company, Inc. (PECO) - Porter's Five Forces: Threat of new entrants

The threat of new entrants into the grocery-anchored shopping center space where Phillips Edison & Company, Inc. (PECO) operates is significantly constrained by substantial capital requirements. A new player would need to immediately deploy massive capital to compete on scale. Phillips Edison & Company, Inc. (PECO) affirmed its full-year 2025 gross acquisition guidance in the range of $350 million to $450 million. To match this, a new entrant would need immediate access to hundreds of millions in equity and debt capital just to begin building a competitive footprint. Phillips Edison & Company, Inc. (PECO) itself reported liquidity of $972 million as of the second quarter of 2025, supported by a net debt to trailing 12-month annualized adjusted EBITDAre ratio of 5.4x. This existing financial muscle creates a high hurdle for any startup REIT or private equity fund attempting to enter the market on a meaningful scale.

The scarcity of high-quality, grocery-anchored assets further deters new entrants. New construction is minimal due to high costs and supply chain constraints, meaning new players cannot easily create new supply to compete with existing, well-located assets. For instance, in-line store fit-out costs averaged $155 per square foot (psf) nationally in 2025, representing a 4% year-over-year increase. This high cost, coupled with limited new supply-which was under 100,000 sq ft annually since 2023-pushes the value of existing centers up. New entrants face the reality of buying established, high-performing assets rather than building them cheaply.

Phillips Edison & Company, Inc. (PECO)'s disciplined acquisition hurdle sets a high financial bar. Phillips Edison & Company, Inc. (PECO) management consistently states their focus is to solve for an unlevered Internal Rate of Return (IRR) above 9% on acquisitions. Furthermore, Phillips Edison & Company, Inc. (PECO) is actively recycling capital, noting they are able to sell product in the market today at about a 7% unlevered IRR while buying at 9%, creating a 200 basis point spread. A new entrant must be able to underwrite deals to meet or exceed this 9% target in a market where premium grocery-anchored centers trade at lower cap rates, typically in the five to six cap range. This required return profile, combined with the high cost of entry, screens out less aggressive or less capitalized potential competitors.

Existing REITs benefit from established scale and deep relationships with national grocers, which new entrants lack. Phillips Edison & Company, Inc. (PECO)'s portfolio of 303 properties across 31 states provides significant operational leverage. This scale translates directly into better negotiating power with national tenants, which is crucial for maintaining high occupancy and strong rent spreads. The sector as a whole is seeing increased institutional participation, with REITs becoming more active.

• REIT acquisitions in the grocery-anchored space hit $531M in Q1 2025.
• Phillips Edison & Company, Inc. (PECO) anchor occupancy was 99.2% as of September 30, 2025.
• PECO is targeting mid- to high single-digit core FFO per share growth annually long-term.
• The company's portfolio retention remained strong at 93.9% in Q3 2025.

Finally, regulatory hurdles and zoning complexities present a significant, non-financial barrier to greenfield development for any new entrant. While Phillips Edison & Company, Inc. (PECO) has a pipeline for outparcel development, establishing entirely new centers requires navigating local municipal approvals, which can take years and involve significant political capital. For example, a major redevelopment project involving a new Publix required seeking at least $48 million in incentives, including a $28.5 million completion grant, highlighting the complexity and public financing often required to bring new, large-scale grocery-anchored projects to fruition. This administrative friction favors established operators like Phillips Edison & Company, Inc. (PECO) who have the experience to manage these processes efficiently.