Come One, Come All
Grocery retailers have always served as ideal shopping center anchors, as they guarantee extra foot traffic by providing consumers with their daily needs. However, rather than simply relying on their traditional role as a source of sustenance, grocers are now providing a number of new offerings, as well.
Following is a look at how leading shopping center operators are leveraging grocery’s new bells and whistles to draw as many customers as possible.
Something Old, Something New
Cullinan Properties currently operates three grocery-anchored shopping centers in Illinois and one in Texas. In addition, the company has grocery-anchored centers targeted for development in Waller, Texas, and St. Charles, Missouri. Cullinan Properties sees the expansion of the traditional grocery offering as a positive development.
“The newer concept of grocers adding cafes, bars, chef demonstrations, community rooms and other products for home is adding strength to the category,” said Kathleen Brill, VP – director of leasing of East Peoria, Illinois-based Cullinan Properties Ltd. “It is giving customers more reason to drive a little further for a unique experience and to stay a little longer.”
Cullinan Properties works with carefully selected grocery partners, such as Kroger, Hy-Vee and Aldi.
“New store locations can be extremely risky, so we take great care in developing a long-term partnership and relationship with our tenants and buyers,” Brill said. “We aim to do multiple locations with the same retailer, so it’s critical to understand the company’s direction, expansion goals and its selection process and criteria.”
The 200-plus-acre Grand Prairie Developments located in Peoria, Illinois, recently added Hy-Vee as a grocery anchor. It is also home to the Shoppes of Grand Prairie with other anchors, including Dick’s Sporting Goods, Bergner’s, Old Navy, H&M, DSW, HomeGoods and Marshalls.
“The site is a regional draw, and Hy-Vee is an excellent complement that fills a major void in this area,” Brill said. “We had a significant grocery store deficiency in the area which was filled.”
Variety Is the Spice of Grocery
Competition for consumer grocery dollars is fiercer than ever, and changes in the industry during the last few years are driving the increased challenge to draw grocery shoppers.
“It is very common for today’s family to shop at several different grocery and warehouse stores to meet their various needs,” said Henry A. Avila, senior VP asset management for privately held real estate investment trust Donahue Schriber. “Common categories include markets that are value-driven; health-, diet- and organic-driven; ethnic food-driven; and warehouse/bulk-driven. Donahue Schriber believes in partnering with the best of each category within their given trade area.”
Based in Costa Mesa, California, Donahue Schriber operates 65 grocery- and drug-anchored shopping centers with more than 10 million sq. ft. of space in California, Nevada, Oregon and Washington. Grocery anchors include Safeway, Vons, Ralphs, Smith’s, Raley’s, Save Mart, Trader Joe’s, Whole Foods Market and Albertsons.
“Our core assets are daily-need consumables,” Avila said. “Donahue Schriber believes that our grocers are our business partners. It is not uncommon for a local shopper to not even know the name of the center, rather referring to it as the Ralphs Center or the Trader Joe’s Center.”
Village Oaks Shopping Center, a 313,572-sq.-ft. center in San Jose, California, illustrates Donahue Schriber’s grocery-anchored strategy. Donahue Schriber purchased the newly constructed center in January 2015, and it is now 96% leased with a tenant lineup featuring Safeway as an anchor. Other notable tenants include Target, ULTA, Marshalls, Petco, Chase and Bank of America, as well as a dynamic lineup of fast-casual restaurants, such as Chipotle, Panera Bread, Panda Express, MOD Pizza and Starbucks.
Grocers Prep for Industry Changes
As previously noted, the grocery industry is undergoing a number of changes, and in some cases grocers are quite literally “preparing” for shifts in how they conduct business. “Dual-income families are seeking more prepared foods that are readily available at our grocers and quick-serve food tenants,” said Peter Moersch, VP leasing-neighborhood and community centers of Irvine, California-based Irvine Company Retail Properties. “Grocers have actively responded to this trend. Smaller specialty grocers, such as Trader Joe’s, are providing unique prepared foods.”
In addition, Moersch said the increasing availability of big-box stores as an alternative to traditional grocery stores is changing consumer shopping habits.
“Consumers are buying their organic produce and specialty items at the higher-end stores, such as Whole Foods, paper goods at the big-box discount stores such as Wal-Mart, and everyday needs at traditional grocers,” Moersch said.
Irvine Company tries to meet the needs of all types of grocery shoppers across its portfolio, tailoring grocery anchors to the shopping habits and traffic patterns of a center’s particular community. Twenty-seven of its 40 centers feature a grocery anchor, and three additional centers feature a big-box store with a grocery component as an anchor. Grocery stores serving as anchors include Albertsons, Ralphs, Trader Joe’s, Pavilions, Gelson’s, Sprouts Farmers Markets, Whole Foods, Haggen and several specialty markets.
One good example of Irvine Company’s grocery-anchored center portfolio is the 462,000-sq.-ft. Woodbury Town Center in North Irvine. Ralphs Fresh Fare and Trader Joe’s serve as anchors, along with multiple “daily needs” anchors, such as LA Fitness and Home Depot.
Also, The Market Place, a more than 1.6 mil-lion-sq.-ft. center straddling Tustin and Irvine, features Sprouts Farmers Market and will soon be home to Namaste Plaza, a 6,700-sq.-ft. Indian market.
Namaste Plaza will fill what Moersch calls a “deficit” in the Orange County marketplace with its vast array of Indian products, while Sprouts offers healthy, affordable food options. “Daily needs” anchors include Target, Lowe’s and Bed Bath & Beyond.
A Fresh Approach
An increasingly popular fresh approach to the grocery business is having an impact on grocery retailing in general, as well as on grocery-anchored shopping centers.
“Traditional grocers are taking a bigger portion of the fresh market in addition to the grocers that are already in that space,” said Jeffrey S. Edison, principal and CEO of Phillips Edison & Company. “In the wake of fresh format entrants into the grocery business, traditional grocers have stepped up their game with a bigger focus on fresh. Supercenters are also paying attention and trying to get a piece of the fresh format market share.”
Edison has a deep understanding of the grocery industry, as the company has focused on grocery-anchored shopping centers for over 25 years. Phillips Edison has more than 300 properties in 35 states. The company’s two biggest grocery partners are Kroger and Publix.
Edison also cited Internet-based grocery retailing, which h