The ‘Whole Foods Effect’ shines on
The surge in health-conscious retailers is evident wherever one shops. In the space of a few years, the likes of Lululemon, Fresh Market, and Orangetheory Fitness have proliferated in shopping centers. But Whole Foods, arguably a chief driver of the trend, has transformed its own business as well as that of centers.
In the past five years, Whole Foods increased its store count nearly 50% to a total of 450 in three countries. The $15 billion juggernaut of organic food shows no signs of slowing, nor do competitors such as Sprouts and Trader Joes. Whole Foods’ growth has helped forge a value proposition that is reshaping the commercial real estate market. People who once came to a shopping center simply to shop today come to spin, to eat better foods, or to learn how their dog food affects the environment.
The result has been a surge in health-conscious retail real estate, with tenants spanning grocery, restaurants, fitness concepts, and pet stores. It’s a trend peopled by educated and accelerated Millennials who are acutely conscious of what goes in and on their bodies and the effects those products have on the earth. Not to be forgotten are Baby Boomers, who are getting older and more health-conscious, too.
Indeed, the seeds of today’s health-driven retail scene were sown when many Boomers were still in high school and college. In 1972 Title IX was passed. It prohibited sexual discrimination in any federally funded school sports program and gave rise to two entire generations of female basketball players, marathoners, soccer players, and triathletes. As a result, a steady flow of fitness concepts like Orangetheory, Flywheel Sports, and Core Power Yoga, to name a few, have sprung up in shopping centers to cater to women who might not have opportunity to play a sport, but who want to remain active.
Fitness centers open new store doors for athletic apparel formats like Fabletics, Lululemon and Athleta. All of these brands are aggressively expanding in shopping centers with fitness concepts, organic grocers, and healthy eating options. Some are even selling their apparel inside health clubs. It’s no longer considered taboo to wear workout apparel while shopping or grabbing a bite to eat, and the demand for attractive, trendy “athleisure” apparel has never been higher.
Traditional grocery stores, meanwhile, are upping their stocks of organic, fresh, healthy food. The rapid expansion of Whole Foods, Sprouts, and Trader Joe’s into shopping centers has forced the likes of Kroger and Publix to become more conscious of the products they sell, as well as the way they merchandise their fresh and organic products.
By catering to this growing health-conscious audience, grocers are poised to capture more market share because of their tremendous buying capacity and the fact that they already have the framework in place to “reset” their stores and reach this target demographic. We also expect to see an increase of customer experiences within these stores, such as growler stations, salad and sushi bars, and wine tastings.
Even pet stores are venturing into this space. Hollywood Feed is a holistic pet food and product retailer that’s filling a void and succeeding because of it. There are nearly 50 Hollywood Feed stores throughout the Southeast, and they are aggressively seeking locations to expand. We expect traditional pet stores like PetSmart and Petco to expand their organic offerings as well in order to better compete and cater to this growing market.
With increased education and conversation about healthy living, these retailers aren’t an anomaly anymore. Instead, they represent an important and viable subset of the real estate market.
Health consciousness isn’t a trend or fad, but the “new norm” – a real lifestyle change that spans generations and brings new opportunities for the commercial real estate industry.
Emil Gullia, senior director for Franklin Street, specializes in tenant representation, occupier and advisory services. He has completed more than $130 million in retail tenant transactions involving retailers such as Cabela’s, Guitar Center, Harbor Freight Tools, and PNC Bank.
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