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Shuttered Sweetbay Supermarkets drag down nearby small businesses

Published Aug. 28, 2015

Chetan Shah took over Anclote Pharmacy in Tarpon Springs in 2010, expecting to run a brisk, successful business.

Then, two years later, the Sweetbay Supermarket anchoring his pharmacy's shopping plaza closed, zapping its biggest source of customers. The lack of foot traffic has prompted some of Shah's neighboring businesses to fold. Shah says he's barely hanging on.

"We used to do 3,000 prescriptions when Sweetbay was here. Now I'm lucky if I do 1,800," in a month, Shah said.

Shah isn't alone. Across the Tampa Bay area, at least 18 buildings formerly occupied by Sweetbay remain vacant, causing many of the small businesses around them to struggle or close.

Though grocers and other businesses are interested in moving into some of those spaces, the company that bought Sweetbay in 2013 — Southeastern Grocers — won't let them because it doesn't want increased competition for their Winn-Dixie stores. The company continues to pay rent for the empty stores, tying up the engines that power other business in the centers.

"Basically, you're screwed," said Steve Kirn, executive director with the David F. Miller Retailing Education and Research Center at the University of Florida. "Unless they can find some sort of noncompeting business to take it over, maybe a hardware store, but nothing else will drive as much traffic as a grocery or convenience store."

When Southeastern Grocers bought Tampa-based Sweetbay, most of the chain's 72 stores were rebranded as Winn-Dixie. But not all of them. The 18 or so unfilled stores were mostly near ''an already operating Winn-Dixie location," said Meredith Holland, a spokeswoman with Southeastern Grocers. "These stores are turned back over to the landlords as leases expire, and we cannot comment on each landlord's plans for the locations."

Some of the closed stores are still leased by Delhaize Group, the former owner of Sweetbay, which are a part of 33 stores the chain closed in 2013 before the acquisition with Winn-Dixie. Some of the shuttered stores are leased by Southeastern Groceries.

Local commercial real estate brokers are trying to sublease some of the former grocery stores, but it hasn't been easy. In some lease agreements, terms say another grocery chain cannot take over the property.

"Various retailers have shown interest in the former grocer spaces, including other grocers, gym/fitness, recreational, entertainment and national large-box tenants that are already in the market or ready to enter the market," said Stephanie Addis, senior leasing adviser with the Shopping Center Group, which has been marketing the former grocery store spaces in Tampa Bay for the past two years.

Most retailers are opening smaller stores and don't need 29,000-59,000 square feet, Addis said, so big-box spaces are usually carved up to make room for several mid-sized tenants.

"This strategy is a costly option for both tenants and landlords alike, affecting the overall economics of potential deals," she said.

Some of the grocery stores were in stand-alone buildings, like the one on Gandy Boulevard in Tampa. A space like that is exactly what a Walmart Neighborhood Market is looking for, said Jim Kovacs, managing director of retail services at Colliers International in Tampa Bay. Walmart has been expanding aggressively in Florida with its smaller grocery store chain, which serves a similar customer base as Winn-Dixie or Sweetbay. The store spaces would be attractive to new chains looking to enter the Florida market too, like Lucky Supermarkets, Earth Fare and Sprouts, Kovacs said.

"But of course, (Winn-Dixie) doesn't want a competitor going in that space. That's why they're still vacant," he said.

Nearby businesses, from restaurants to nail salons to dry cleaners, have suffered because they often depend on the foot traffic a big grocery store brings to a plaza.

"It's going to be hurtful, there's no question about that," Kovacs said. "And a lot of the plaza owners and landlords are absentee to the market. If it was in their neighborhood, I bet they might try harder to fill in that space with another good tenant. But most landlords are not altruistic."

The kinds of tenants that can be successful after a grocery store leaves have to be "destination" shops that attract their own kind of clientele anyway, Kovacs said.

"They don't need the anchor next door for their business. They bring their own," he said.

In New Tampa, the shuttered Sweetbay just means there's more parking for shoppers visiting the Home Depot next door.

But for Shah in Tarpon Springs, the results have been devastating.

"It was like a domino effect," said Keith Cotner, the pharmacy's manager and Shah's only other employee. "Once the grocery store went, everything started to go."

When the Sweetbay closed, so did a doctors office next door, which was a great source of walk-in business for the pharmacy. Other tenants followed shortly after.

"It's a bad situation," Kirn said. "You have to go with the assumption that things are going to get better there, but they usually don't. Most of these plaza tenants rely on the traffic coming from grocery stores to survive. If that's not there anymore, it's simply time to move."

Contact Justine Griffin at jgriffin@tampabay.com or (727) 893-8467. Follow @SunBizGriffin.

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