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PREIT: Matching Mall And Grocer

BY CSA STAFF

Turns out, malls and grocers were made for each other.

A few years ago, Philadelphia-based Pennsylvania Real Estate Investment Trust (PREIT) renovated Plymouth Meeting Mall in Philadelphia’s northwestern suburbs.

The renovation replaced an old Ikea on the site with a lifestyle component called Plymouth Meeting Mall’s Plaza Shops, which leads customers to the mall entrance.

PREIT brought in a 65,000-sq.-ft. Whole Foods Market as the anchor.

“We like Whole Foods’ customers,” explained Joseph F. Coradino, PREIT’s CEO. “They have disposable income; they are well educated, edgy and fit. They also shop Whole Foods at least twice a week. We thought their shopping patterns might draw more customers to other stores."

It did. “Whole Foods has influenced a number of stores positively, including a Charming Charlie, Loft, Olly Shoes, Massage Envy and others.”

Proof? Mall sales rose to $350 per square foot from $250.

What challenges face a mall grocer? “Parking,” said Coradino.

“Grocers want close-in parking for customers. For Whole Foods, we added 300 parking spaces under the store to the surface parking. A cart escalator helps them move their groceries down.”

The idea might be catching on. Coradino is considering it for other malls, and Whole Foods is taking space at the Colonie Center mall in Albany, N.Y.

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Grocery Evolution

BY Michael Fickes

Supermarket-anchored shopping centers haven’t changed much since the invention of suburbia. Find a good location, sign a grocery anchor, get a construction loan and some inline local, regional and maybe national retailers, and you’re in business.

Today, however, supermarkets are beginning to change, and supermarket-anchored shopping centers, of course, must follow along.

Why are grocers changing? Competition from all sides.

Big boxes like Wal-Mart, Target, warehouse clubs and drug stores are competing with traditional grocers for commodity dry-goods sales.

Specialty grocers such as Whole Foods Market are attacking from the high end with prepared meals and excellent service.

These trends arose before the Great Recession. Today, as recovery proceeds, so will the evolution of grocery-anchored shopping centers, looking for economic recovery and competitive weapons.

Here’s an overview of the kinds of changes that shopping center developers and owners are seeing.

Crossroads Cos.
Evolution is natural

Mahwah, N.J.-based Crossroads Cos. owns, manages and leases five shopping centers in New Jersey and southern New York. The firm has developed some of its centers from the ground up and acquired others. So president and CEO Stephen L. Hittman has observed the grocery-anchored business from all angles.

"Supermarkets are constantly evolving based on size, customers, food products and price model," said Hittman. "The recession made companies close unprofitable operations and focus on operating efficiencies. Disposing of surplus real estate from the closings had a downward effect on rents, while job losses had a negative impact on profit margins as income levels and spending dropped."

Hittman’s point: All of these kinds of pressures cause shopping centers and the industry to adjust, change and evolve.

The company’s Crossroads at Somerset development in Franklin Township, N.J., offers an example of controlled evolution.

Anchored by a 73,000-sq.-ft. ShopRite, the center has evolved in phases over the past five or so years, as the surrounding upscale suburban neighborhood has been producing and filling 4,000 new housing units.

"We have completed three of four retail buildings and expect to start construction on the remaining 25,700-sq.-ft. building this fall," Hittman said. "Upon completion, it will be a 120,000-sq.-ft. neighborhood shopping center, with a nice mix of regional, national and neighborhood tenants."

Phillips Edison
The industry is making better decisions

One of the largest privately held owners of neighborhood and community shopping centers, Cincinnati-based Phillips Edison & Co. manages a portfolio of more than 280 properties, works with industry-leading grocers such as Kroger, Publix, Safeway and Giant Eagle, and has a comprehensive overview of the industry.

How is the industry evolving from that vantage point? "The majority of our grocery-anchored growth is driven by acquisitions for Phillips Edison-ARC Shopping Center REIT," said Bob Myers, president and COO. "That said, I think people have changed more than the assets. Most everyone has learned from the difficulties that we all experienced during the recession, and this has resulted in improved decision-making.

"Shoppers are more strategic on where they spend their hard-earned dollars. Landlords are savvier about creating a more stable merchandising mix of quality tenants. Retailers are more sophisticated in developing their expansion plans. Lenders are more disciplined in their underwriting."

As an example, Myers pointed to the quality of the merchandising and location decisions made by the developer of a recent acquisition — the 148,963-sq.-ft. Kleinwood Center in Spring, Texas, a Houston suburb. "It is our first center with H-E-B as the anchor, and it is 93% occupied. Other key tenants include Starbucks, Hallmark, Jimmy Johns, TGF Haircutters, The UPS store, Little Caesars and Weight Watchers.

"We like this center because it is located at an excellent intersection with a growing population base."

Casto
Rely on long-standing relationships

Change comes easier to developers with long-standing relationships with blue-chip anchor tenants.

"Real estate is about relationships," said Don Casto, a partner with Columbus, Ohio-based Casto.

The company has been building relationships with grocers, retailers and communities for more than 85 years. It has a portfolio of more than 120 shopping centers in the United States and Puerto Rico. Of those, 90% include a supermarket or a big-box retailer with a large food selection.

"We have long-standing relationships with gold-credit tenants," continued Casto. "We partner with Kroger, Whole Foods, Harris Teeter and Giant Eagle. We include Wal-Marts and Targets with expanded food selections in the mix as well."

Casto also said that the recession caused grocery anchors to become more selective about expansion plans. "Still we benefited from strong relationships," he said.

"Our tenants trusted that if they committed, we would then be able to bring a nice tenant mix and achieve appropriate financing."

A recently completed center, the 121,177-sq.-ft. Memorial Commons, in Goldsboro, N.C., illustrates Casto’s core thinking. "It all goes back to the old adage, ‘location, location, location,’" said Casto. "Anchored by Office Depot and a 53,232-sq.-ft. Harris Teeter, Memorial Commons has an ideal location at the gateway to Wayne Memorial Hospital, Wayne County Community College and the highest concentration of high-end housing in Goldsboro."

Donahue Schriber
Leveraging a lack of new developments

In California, the recession brought supermarket-anchored shopping center development to a halt.

"With no new development and competition from discount grocers, we’ve seen our traditional grocers investing in their existing stores and developing new offerings," said Lawrence P. Casey, president and COO of Costa Mesa, Calif.-based Donahue Schriber. "If you’re a developer, that’s bad news. But for owners — and we own — it is good. By investing in their stores, they invest in our centers and drive more business."

Donahue Schriber owns and manages a portfolio of 79 shopping centers throughout California, Arizona, Nevada, Oregon and Washington. Not including Targets and Wal-Marts, the company has 39 grocery stores and 13 major names, including Safeway, Kroger brands, Raley’s, Save Mart and Trader Joe’s, according to Casey.

The lack of new centers makes it difficult for new grocers to break into the California market. They have to fit themselves into existing vacancies.

That’s what happened recently at Donahue Schriber’s Laguna Crossroads in Elk Grove, Calif. "At one time, an Albertsons shadow-anchored that center," said Casey. "When it closed, we bought the site and reconfigured the 60,000-sq.-ft. space for Stein Mart, Kirkland’s and a 22,000-sq.-ft. Fresh Market, which was just entering the California market.

"In fact, Fresh Market is going into a former Borders in another center that we own."

Paster
Battling the commodity grocery discounters

Based in St. Paul, Minn., Paster Enterprises senses that powerful competitive challenges are beginning to buffet the industry. "How do we compete with big-box retailers getting into groceries?" asked Howard Paster, president. "Grocery folks from the low end to the high end realize that service is the way we differentiate ourselves from discounters."

Paster is working with his grocers — Aldi’s, Cub Foods, Festival Foods, Jim’s Market and Knowlan’s Food Markets — to figure out a service formula at Paster Enterprises’ half-dozen grocery-anchored centers.

With that question in mind, he is watching an experiment being carried out by Lunds & Byerlys, a regional Twin Cities grocer. In May of last year, the company opened a 20,000-sq.-ft. Lunds in downtown Minneapolis. "It has a smaller footprint, green construction, and 70% of the product is prepared foods," Paster observed. "They aren’t selling groceries at a 1% margin. I think this is where a lot of the industry is heading."

Service isn’t the only answer to big-box competition. Paster is beating the discounters at their own game in one of his centers. Aldi Foods co-anchors (with Chipotle and Half Priced Books) the 55,532-sq.-ft. Crystal Town Center in Crystal, Minn. "No one beats us on price there," he said. "You can differentiate with service at the high end and by price at the low end."

Irvine
A cross-shopping trend

During the recovery, Peter Moersch has seen a number of new trends emerge.

Moersch, VP neighborhood and community center leasing with Irvine Co. Retail Properties in Irvine, Calif., has a good vantage point. Irvine has 30 grocery-anchored centers and a diverse roster of grocers, including Albertsons, Ralphs, Vons Pavilions and Gelson’s, plus specialty supermarkets like Sprouts Farmers Markets, Trader Joe’s, Whole Foods Market and Bristol Farms. Four centers have Wal-Marts or Targets with grocery stores. "We’re seeing people shopping each of the different formats," Moersch said. "They will go to high-end outlets for meat and poultry and to discounters for commodities."

Moersch also noted that dual-income families seem to be seeking out more prepared foods. Woodbury Town Center in North Irvine illustrates both trends. Population within five miles is 233,188 and average household income is $129,611. If you think those demographics suggest a specialty grocer as anchor, you would be right. There is a Trader Joe’s. But you would also be a little bit wrong, because Ralphs also anchors the center.

"Both are well shopped," explained Moersch. "In addition, we think that addressing all grocery needs in one center draws people in.

"We view our grocery stores as an amenity. Each grocer in each center fits the shopping habits of that particular community."

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A.Olson says:
Sep-24-2013 05:05 am

Many other stores like Wal-Mart,Target and drug stores are competing with traditional grocers such as for dry-goods sales,stores provide various discount to the customer. Read here

A.Olson says:
Sep-24-2013 05:05 am

Many other stores like Wal-Mart,Target and drug stores are competing with traditional grocers such as for dry-goods sales,stores provide various discount to the customer. Read here

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Paint Grows Greener And More Sophisticated

BY CSA STAFF

Whether it’s a remodel or new construction, paint is one of a retailer’s most essential and cost-effective design tools. Chain Store Age spoke with Jim Gorman, of Benjamin Moore & Co., about how paint is being affected by technology and environmental concerns. The company, founded in 1883, manufactures its own resins and colorants, and has more than 3,400 colors in its collection.

What is the most common mistake retailers make when it comes to painting?

Buying paint on price and attempting to match colors by computer to save money. I say this because paint technology has changed dramatically over the last five years, and today’s newer technology is not available everywhere.

The new high-performing zero- and low-VOC products are ideal for occupied spaces with quick turnaround and getting retail space back to service — in some cases, in half the time normal paint would take.

How about choosing a color — any recommendations for retailers?

The answer is connected to the one above. With today’s paint choices and new colorant technology, retailers today can be far more adventurous with color without the penalties often associated with deeper colors.

Working with a manufacturer’s representative, a retailer can select bold colors and not have to worry about numerous coats, poor hide, touch-up or washability. It comes down to selecting the right product for the selected color and project.

Is there an easy way retailers can stay updated as to the latest color trends?

Yes, many paint manufacturers have designer representatives who will provide "lunch and learn" seminars with a client’s design staff. Manufacturer’s websites also can provide updates on trends. One of the best ways is to meet with paint manufacturers who belong to key retail associations, develop a relationship and connect with their color specialists.

Is technology impacting your business?

Tremendously! With the continued emphasis on VOC regulations, Benjamin Moore has developed a patented technology that provides industry-leading, high-performing zero- and low-VOC products.

These products clearly outperform any of the conventional paints manufactured over the last 25 years. This has placed Benjamin Moore at the forefront of green paint technology that many cannot replicate.

How have environmental concerns affected paints?

As environmental regulations tightened within the paint industry, manufacturers were forced to revise formulas to meet the regulations.

For some, this caused their products to lose some key performance attributes, especially in application and dry film performance. For Benjamin Moore, which invests heavily in R&D and manufactures its own patented colorant and resins, this became a break-through opportunity to develop our best products ever.

How can Benjamin Moore help retailers with regard to their green strategies?

All of our new products identified as "Green Promise" products meet or exceed every local and state VOC regulation. The best step a retailer can take is to meet with a Benjamin Moore representative to review their current specification and convert any of the older products to the new Green Promise products. Every aspect of their paint projects will benefit, especially the quick turnaround, low odor and back to service, all designed to save the client time and money.

The second step is to work closely with Benjamin Moore’s national account team to assure the retailer that the products and colors they selected are actually used on the job. Paint is one category where the paint contractor can, and at times will, substitute products on the job site for a variety of reasons. Colors may be a "close match" and VOC levels may be higher — you never know unless you are stringent with the contractor following the specification. Benjamin Moore has a project management team that can help assure our clients the right colors and products are used every time.

What makes Benjamin Moore’s "green" paints so green?

The secret is in the colorant. Being the only North American paint manufacturer to develop a patented zero-VOC colorant allowing our clients to choose any color and still have a zero-VOC product was an industry first. Conventional colorants, called universal tinting colorants, are very high in VOC levels. The other benefits listed above all add up to a unique benefit to our clients: high-performing zero-VOC products that do not cost more, but perform better than classic paints.

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