Moving In
Sep 1, 2009 12:00 PM, By Elaine Misonzhnik
Grocers increasingly are taking over vacant big boxes.
Other companies considering smaller stores include Culinaria, an offshoot of Schnuck Markets, which recently opened in St. Louis, and Urban Fresh, a Jewel-Osco concept that opened in Chicago last year, according to Matthew Casey, president of Matthew P. Casey & Associates, a Clark, N.J.-based supermarket real estate consultant. The first Culinaria totals 30,000 square feet of space while Urban Fresh inhabits 16,000 square feet.
Meanwhile, Developers Diversified Realty, a Beachwood, Ohio-based shopping center REIT, recently signed a lease with Sprouts Farmers Market for a Culver City, Calif., site vacated by Circuit City. The Phoenix-based chain operates stores under 26,000 square feet. Developers Diversified is currently working on another lease and has executed a sales agreement for some of the remaining boxes in its portfolio, according to Paul W. Freddo, senior executive vice president of leasing and development with the firm. “We do have significant interest from supermarkets and specialty grocers,” he notes. As of year-end 2007, Circuit City stores accounted for 1.2 percent of Developers Diversified's GLA and Linens 'n Things for 0.5 percent.
In addition, discounters including Wal-Mart and Big Lots have also been looking at big boxes for their smaller, grocery-centered concepts. Last year, for example, Wal-Mart launched Marketside, a convenience-sized grocery store, at four locations in Arizona. Marketside locations measure approximately 15,000 square feet — about the same size as Tesco's Fresh & Easy concept. And this May, Columbus-based Big Lots opened its first Polaris store, which will be built around grocery products at the Polaris Towne Center in Polaris, Ohio. The 35,000-square-foot store is located inside a former Linens 'n Things building. Altogether, Big Lots plans to open 45 new stores in 2009.
“We continue to get a lot of activity from discount retailers that carry groceries, including Dollar General, Big Lots and 99 Cents Only,” says Williams. “Maybe for every five deals they signed last year, they are doing one this year. But the retailers that are out there are looking at this as an opportunity to upgrade their leasing portfolio where they can.”
Looking for the prime spot
Landlords still have to keep in mind that urban boxes will be a lot easier to move than suburban ones. Livingston, who recently completed a market study for a grocery chain that is considering moving to a former big-box location, says the tenant will be looking for a trade area with income levels above $100,000 per year, average age above 30 years old and education levels above bachelor's degree. The Dublin site that Deborah Perry is currently marketing would fit these criteria — average household incomes in the five-mile radius are $125,691 per year and daytime population totals more than 117,000. That's why more than one retailer has expressed interest in the space. But a vacant box in a secondary or tertiary market with less spectacular demographics won't attract a lot of attention.
“There are a lot of very unique, once-in-a-lifetime real estate opportunities [out there] because of what's going on,” says Williams. “Having said that, there's certainly not an overwhelming amount of leasing activity.”
A longer version of this article appears at retailtrafficmag.com/features.
U.S. Big-Box Retail Summary
|
| Q1 2008 | Q1 2009 |
|---|---|---|
| Vacancy | 4.5% | 7.3% |
| bps chg. |
| 280 |
| Absorption | -230,737 | -1,057,687 |
| Rent ($/sf) | $11.83 | $11.30 |
| pct. chg. |
| -4.5% |
| Includes properties between 50,000 and 100,000 square feet | ||
| Sources: Marcus & Millichap Research Services and CoStar Group | ||
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