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 he said is still in the experimental stage. According to Edison, only a small percentage of grocery sales are currently executed online, with traditional grocers dominating the space.
“In addition to fresh foods, customers are also experimenting with trends in convenience, like personal shoppers,” said Edison. “Kroger and Wal-Mart are testing buy-online-pickup-in-store groceries. We’re betting the multichannel approach will work, and pure-play internet grocers will have a difficult time.”
Kleinwood Center, a 150,000-sq.-ft. center anchored by an H-E-B store in Spring, Texas, exemplifies Phillips Edison’s grocery-anchored portfolio and is an example of a traditional grocery store anchor focused on responding to consumer trends. The center also includes such tenants as Starbucks, Jimmy Johns, Little Caesars and Weight Watchers, and has 90,000 residents with an average annual household income of $115,000 in a three-mile radius.
“We purchased Kleinwood Center in 2012 and raised occupancy rates from the low 90s to the high 90s,” said Edison. “We remerchandised to better meet the needs of our customers and worked to improve the property.”
Facilities Winter Prep
It’s only September and still technically summer. But calendar aside, it is time to start prepping HVAC systems for the colder days ahead.
Oddly enough, most retailers start to prepare for the summer season months ahead of the first 95-degree day. Plans are developed to schedule the HVAC spring inspections well in advance, so when the first heat wave hits, stores will be ready to start pumping cold air to keep their customers very comfortable. But once the spring inspections are completed and the summer is under way, the HVAC system is once again out of sight, out of mind. But like clockwork, the fall season approaches quickly, and there needs to be the same amount of effort put into scheduling the HVAC fall inspections, so on the first 40-degree day stores will be ready to pump out warm air to keep those same customers comfortable.
FALL INSPECTION: Scheduling a fall HVAC inspection requires a few steps. The first involves understanding how the units operated over the summer. A few simple questions can provide the information rather quickly. The questions should include:
- Did the units run properly over the summer cooling season?
- Were there any major service issues during the summer cooling season that would affect the units in the winter season?
- During the summer inspections, were there any recommendations that were listed to address during the fall inspection?
- Have there been any complaints from the stores about certain areas being uncomfortable?
These questions seem very basic and might be looked at as a waste of time. The answers, however, are crucial to preparing for the fall inspections, in that they allow for repair parts to be ordered in a timely fashion so there aren’t any delays once the inspections start.
In addition, asking the questions means that the facility department has to reach out to the stores to ask about the performance of the equipment. Store managers will know if there were issues in the store that may not have been severe enough to require a service ticket, but certainly need addressing.
The second step in the process is to start making calls to the vendors to schedule the work. With the information gathered during the question-and-answer phase, the vendors can now be given an updated scope of work for the inspections, which allows them to schedule the inspections with a complete understanding of what is expected.
This will limit the expensive delays and frustrations that are inevitable when recommended work is not documented and listed in the scope, but needs to be done as part of the fall inspection. There is nothing more irritating for a vendor than to arrive on-site to do an inspection only to find that there are other services that needed to be completed first.
FOLLOW-UP: Once the inspections are scheduled, there is only one more step in this process: the follow-up. The only way to verify that inspections were completed is by following up with the vendor before and after the inspection takes place.
The initial (or before) follow-up reminds the vendor of the agreed-upon date, and the second follow-up verifies the work has been completed. Too often there isn’t any follow-up, and the assumption is that the work was done to their satisfaction. When this happens, the time and energy that was put into managing the project ends up being totally wasted.
The first cold day of the season is not the time to start thinking about preparing stores for the winter. Preparations need to be made well in advance so on that first 40-degree day, customers can walk into a very comfortable and inviting environment.
John Haley is the director of HVAC services for Ferrandino & Son (ferrandinoandson.com), a national facility management company.
Comcast’s New Prototype High on Engagement
Comcast has unveiled a futuristic-looking, tech-savvy store prototype aimed at enhancing the cable giant’s brand reputation and service experience. Focused on the customer, the new Studio Xfinity in Chicago aims to entertain, engage and inform shoppers with hands-on experiences.
Comcast partnered with ESI Design, New York City, on the 9,000-sq.-ft. store, which is also serving as a showcase for the company to debut and test new service initiatives. At Studio Xfinity customers can test drive new Xfinity products on the store’s 46 tablets and touchscreen demo surfaces, play custom-designed multi- and single- player games and engage with special content and programming in the media-rich entertainment space. They can also pay bills and exchange and pick up new equipment.
“From the outset, ESI Design worked with Comcast to create an innovative and immersive retail context that would offer an interactive, engaging customer experience,” said Joe Karadin, director of physical design for ESI Design. Custom app: In the store’s most notable feature, customers are provided with dedicated in-store support from the moment they enter via a tablet-based, custom-designed app. The app, in test mode, at the store gives staffers access to customer information, from their services to troubleshooting histories. (ESI worked with tech design firm Control Group on the technical development of the app.)
Studio Xfinity also features:
- Three flexible, multipurpose studios, with 12-ft. by 7-ft. LED screens and theater-style seating, where customers interact with each other and the studio screen while playing single- or multi-player games, participate in live demos, or test-drive new or existing Xfinity products;
- Large towers that offer guests the opportunity to explore products and services via iPads or take part in one-on-one or group demonstrations led by associates; and
- Over 800 ft. of LED screens and large-scale media installations, including a 107-ft.-long LED media band wrapping the store’s upper walls, that display brand messages and live or on-demand programming that can coordinate with each of the studios.