Saturday, April 21, 2018
Business

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."

Comments
Some people are paying for cuddles. And it’s not what you might think.

Some people are paying for cuddles. And it’s not what you might think.

When Samantha Hess’s marriage ended five years ago, she felt she was lacking a basic human need: Physical touch. As a woman in her late 20s living in Portland, Oregon, she found plenty of men interested in dating, but sexual contact was not what she ...
Published: 04/21/18
Judge: Foreclosure defense lawyer Mark Stopa violated numerous rules of conduct

Judge: Foreclosure defense lawyer Mark Stopa violated numerous rules of conduct

Tampa Bay foreclosure defense lawyer Mark Stopa has violated numerous rules of professional conduct and caused two clients to nearly lose their homes because he failed to tell them about settlement offers from their banks. Those were among the prelim...
Published: 04/20/18
Updated: 04/21/18
Goodwill to open second store in greater Brandon

Goodwill to open second store in greater Brandon

Times staffThe greater Brandon area will celebrate the grand opening of its second Goodwill store beginning at 9 a.m. on Saturday (April 28) at 1407 U.S. 301. The new store will add another 12,000 square feet to the complex, which includes a 200,000-...
Published: 04/20/18
Updated: 04/21/18
Regulators allow major solar company to lease home equipment

Regulators allow major solar company to lease home equipment

State regulators Friday determined that one of the country’s largest residential solar companies, San Francisco-based Sunrun, is allowed to lease solar energy equipment for homes in Florida. The decision, solar energy advocates say, could open the do...
Published: 04/20/18
Florida unemployment at 3.9 percent for sixth straight month

Florida unemployment at 3.9 percent for sixth straight month

For the sixth month running, Florida’s unemployment rate held at a nearly 11-year low of 3.9 percent in March as steady job gains continued. While many factors kept Florida’s economy chugging along, three industries stand out for leading year-over-ye...
Published: 04/20/18
Owners say new house is a disaster; developer accuses them of ‘online terrorism’

Owners say new house is a disaster; developer accuses them of ‘online terrorism’

ST. PETERSBURG --- Stretched across the front of Tim and Hyun Kims’ two-year-old house is a big banner with the name of a developer and the words: "I have to fix my new house."Some of what needs fixing is instantly apparent. The front steps are too ...
Published: 04/20/18
Florida hits a milestone: More than 100,000 people are registered to use medical marijuana here

Florida hits a milestone: More than 100,000 people are registered to use medical marijuana here

Florida has hit a milestone of sorts as it slowly moves toward wider availability of medical marijuana.The number of patients in the state who are registered to use the substance has surpassed 100,000 for the first time, according to Florida Departme...
Published: 04/20/18
Q&A: Walmart leader chats about Florida stores, and the chain’s latest retail strategy

Q&A: Walmart leader chats about Florida stores, and the chain’s latest retail strategy

The Tampa Bay Times recently sat down with Walmart director of corporate communications Phillip Keene to chat about the retail giant’s latest retail strategies and how the company is winning over customers in a competitive market.Already, two of the ...
Published: 04/20/18
SunTrust warns 1.5 million clients of potential data breach

SunTrust warns 1.5 million clients of potential data breach

Associated PressNEW YORK — SunTrust Banks Inc. says accounts for 1.5 million clients could be compromised following a potential data breach. The Atlanta bank says that it became aware of the potential theft by a former employee and that the investiga...
Published: 04/20/18
Spring break, hurricane relief boosted Tampa Bay hotels in March

Spring break, hurricane relief boosted Tampa Bay hotels in March

The Tampa Bay area’s hotel occupancy rate rose to 87.5 percent in March, the highest level in three years. The rise was fueled by spring break vacationers as well as insurance adjusters and hurricane cleanup crews flooding the state to restore it aft...
Published: 04/20/18