Make us your home page
Instagram

Malls look to grocery stores as a 'survival tactic'

For decades, department stores like Macy's and Sears have anchored sprawling suburban malls. Now as their business has languished and they board up shop, another sort of tenant is trying its luck in their place: grocers.

"There has been a real acceleration of anchors closing their operations," said Mark Ordan, who knows both sides of the equation as former chief executive of Fresh Fields and a former chief executive of a leading mall operator. "As traditional anchors leave, it's an opportunity for both the mall owner and the supermarkets."

Just last month, shares of mall real estate investment trusts swooned after J.C. Penney announced plans to close up to 140 stores this year. The mall-quake followed a spate of bad news in recent months from Macy's and Sears, two traditional mall anchors who said they plan to close hundreds of underperforming stores.

Ordan said malls are great locations for big grocery stores because of their parking, the visibility and the large format they provide.

"It makes it very attractive for the tenant," he said.

It also suits the millennial shopper, who prefers the efficiency that combines a visit to the mall with retrieving that week's groceries.

The grocery store inhabiting the mall isn't exactly new, but "it's certainly an emerging trend," said Tom McGee, chief executive of the International Council of Shopping Centers. "Part of it is convenience, the ability to do things in one location. Millennials value convenience."

Kroger Co., the nation's largest grocer with close to 4,000 locations, recently bought a former Macy's space at Kingsdale Shopping Center in Upper Arlington, Ohio.

At the Natick Mall in Massachusetts, according to a report in the Wall Street Journal, Wegmans Food Market is leasing 194,000 square feet of space vacated by J.C. Penney.

365 by Whole Foods is set to open this year at College Mall in Bloomington, Indiana, the report said.

And other negotiations are underway.

Groceries or not, the traditional mall is looking different.

Higher-end malls with underperforming anchors such as J.C. Penney, Macy's, Bon-Ton and Sears are renting to movie complexes, food courts, restaurants and fitness centers instead, emphasizing experiences and fun over shopping.

"Part of it is a survival tactic," said Calvin Schnure, an economist with the National Association of Real Estate Investment Trusts. "E-commerce is changing people's spending patterns. But in the process, they are changing the shopping experience in a mall."

Grocery store experts say supermarkets would rather be the main attraction in a strip mall than take the anchor position in a suburban mall.

"The fact that there's vacant mall space at the old-school, indoor malls and the hit they are taking from online companies is really significant," said Jeffrey Metzger, publisher of Food World, a publication covering the grocery industry. "If you talk to Giant, Safeway or Kroger, the old-world mall is not their target. They would still like to be on Main Street."

Jeff Edison is chief executive of Phillips Edison & Co., which owns 339 shopping centers across the nation, nearly all of which are anchored by a grocery store.

"The traditional grocers are going to continue to be three miles from people's houses as opposed to the more regional locations like the malls," he said. "It's all driven by convenience."

Edison said shopping centers allow grocery customers to park closer to the store and give easier access by being closer to their communities than malls.

"You may get your nails done and pick up dry cleaning next to a grocery business," he said, "but it's driven on a necessity basis as opposed to an impulse purchase, which is what the malls are driven by."

Not all malls renting to grocers are troubled. Some individual tenants may be underperforming because of lack of reinvestments and upkeep while the mall overall is healthy. But a grocer can be a welcome replacement to exploit a prime piece of real estate.

Grocers can bring several assets to a mall, including heavy and routine foot traffic. A Kroger could generate $50 million in sales at its mall location compared to an aging department store generating $10 million or $15 million a year.

"Losing a mall anchor and replacing it with a grocery store adds a ton of value to a mall," said Margaret Caldwell, managing director at JLL, a real estate services firm. "Some of these malls, the anchors aren't generating a lot of foot traffic. If you put a grocer in there, people will be there doing their weekly grocery shopping versus shopping once a month at Macy's."

McGee said it has less to do with the disruption from online retailers and more to do with opportunism between landlord and tenant. He pointed out that online sales are still dwarfed by the nearly $5 trillion a year at brick-and-mortar retailers.

"As space opens up in a mall or regional shopping centr, the property owner and developer looks at the demographics and needs and matches up the space with the needs of the area," McGee said. "It is all about driving traffic, driving folks to the shopping center. The best way to do that is to look at what is needed in that area and match up the needs with this space."

Cliff Logan worked as an executive at Giant Food for 12 years and now runs a sausage company in northern Virginia. Logan splits his time between Boca Raton, Florida, and Arlington, Virginia. He said many malls, particularly older locations, are being hard hit by Amazon.com and online purchases.

"Amazon is putting a big hurt on a lot of these malls," he said. "There's a mall in Palm Beach with two or three schools in it, a synagogue and newspaper publisher in it, and a place where you can buy a cup of coffee and doughnut. There's not a single retail store in it."

Malls look to grocery stores as a 'survival tactic' 03/12/17 [Last modified: Sunday, March 12, 2017 11:12am]
Photo reprints | Article reprints

© 2017 Tampa Bay Times

    

Join the discussion: Click to view comments, add yours

Loading...
  1. Lightning GM Steve Yzerman sells house for $3 million to new player

    Real Estate

    TAMPA — Tampa Bay Lightning General Manager Steve Yzerman's multi-million Davis Islands home is staying in the Lightning family. Yzerman sold his 6,265-square-foot house Monday to new defenseman Dan Girardi for $3 million.

    The Davis Islands home of Tampa Bay Lightning General Manager Steve Yzerman sold for $3 million Monday to Lightning defenseman Dan Girardi. | [Courtesy of Hi Res Media]
  2. Trigaux: As Florida seeks top 10 status as best business state, red flag rises on workforce

    Business

    In the eternal quest to appeal more to business than other states, Florida's managed to haul itself out of some pretty mediocre years. After scoring an impressive 8 among 50 states way back in 2007, Florida suffered horribly during and immediately after the recession. Its rank sank as low as No. 30 only four years ago, …

    Florida's trying to make strides in preparing its high school and college graduates for the rapidly changing skill sets of today's workforce. But the latest CNBC ranking of the best and worst states for business gave Florida poor marks for education, ranking No. 40 (tied with South Carolina for education) among the 50 states. Still, Florida ranked No. 12 overall in the best business states annual ranking. [Alan Berner/Seattle Times]
  3. Florida: White man who killed black person to be executed

    State Roundup

    GAINESVILLE — For the first time in state history, Florida is expecting to execute a white man for killing a black person — and it plans to do so with help of a drug that has never been used previously in any U.S. execution.

    This undated photo provided by the Florida Department of Corrections shows Mark Asay. If his final appeals are denied, Asay is to die by lethal injection after 6 p.m. Thursday. Asay was convicted by a jury of two racially motivated, premeditated murders in Jacksonville in 1987.  [Florida Department of Corrections via AP]
  4. Can the Bad Boys Mowers Gasparilla Bowl thrive in competitive sports market?

    Business

    ST. PETERSBURG — It's a funky name: the Bad Boys Mowers Gasparilla Bowl. But the new sponsors for the former St. Petersburg Bowl might need more than an eye-catching name to create a thriving, profitable contest.

    NC State head coach Dave Doeren clutches the championship trophy after winning the Bitcoin Bowl at Tropicana Field in St. Petersburg in 2014. Bowl organizers are changing the name of the game to the Bad Boy Mowers Gasparilla Bowl.
[

MONICA HERNDON | TIMES]
  5. Apple Scales Back Its Ambitions for a Self-Driving Car

    Autos

    SAN FRANCISCO — As new employees were brought into Apple's secret effort to create a self-driving car a few years ago, managers told them that they were working on the company's next big thing: A product that would take on Detroit and disrupt the automobile industry.

     In this Monday, April 10, 2017 file photo, Luminar CEO Austin Russell monitors a 3D lidar map on a demonstration drive in San Francisco. Russell, now 22, was barely old enough to drive when he set out to create a safer navigation system for robot-controlled cars. His ambitions are about to be tested five years after he co-founded Luminar Technologies, a Silicon Valley startup trying to steer the rapidly expanding self-driving car industry in a new direction. Apple says it will scale back its amitions to build a self-driving car.  [AP Photo/Ben Margot]