Shopping Centers Today

MAR 2017

Shopping Centers Today is the news magazine of the International Council of Shopping Centers (ICSC)

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Page 48 of 59

M A R C H 2 0 1 7 / S C T 49 demographic trends in the country. "Economic fundamentals in the Triangle are extremely strong," said John Bemis, executive vice president and retail market lead at JLL. Annual income in the area averages $75,000 per capita, and this combines with a comparatively low cost of living and doing business. "Also, the strong higher-education component, including the University of North Carolina and Duke University, is feeding talented graduates into this machine that the Triangle has become," said Bemis. "It makes for a great environment for people to operate in." For decades the local market has been dominated by North Carolina– based Harris Teeter Supermarkets, which The Kroger Co. acquired in 2013 for $2.4 billion. "When you have a market like that all to yourself for a long time, people are going to finally stand up and take notice," said Bemis. "It's kind of this whole coming together of a lot of different forces that have turned this into a grocery battleground." Beyond Harris Teeter, the new dynamic adds to a relatively fragmented local grocer market. "Publix, Wegmans and Lidl are crossing paths at the same time, and then you add all the grocery stores that are already here, including Harris Teeter, Food Lion, Lowes Foods, Earth Fare, Fresh Market and Ingles, and you have some competition," said Charlie Coyne, senior vice president of retail in CBRE's Raleigh office. The new entrants are all hoping that their major points of differentiation will help them achieve success, observes Bemis. "Lidl is in that discount Aldi mode: sparse, very German and very well run," he said. "Wegmans When you have a market like that all to yourself for a long time, people are going to finally stand up and take notice" " ground, where they are not really upscale, and they are not necessarily discount either." Even Dollar General has entered the local grocery game with its new, small- store DGX concept, targeting on-the-go urban shoppers in downtown Raleigh. The 3,400-square-foot store began selling some grocery items in February from its ground-floor site in the midrise Edison Lofts apartment complex. This is not the first time grocers have viewed the South as fertile ground for new stores. In the early 1990s a similar battle brewed in Atlanta as Publix moved in to a market once dominated by A&P, Kroger and Winn- Dixie. "When Publix pushed up into Atlanta, Kroger ignored them for the most part and decided that they [Kroger] were the 900-pound gorilla, and this little upstart from Florida wasn't going to be a serious challenger," said Bemis. "I can guarantee you Kroger will not make the same mistake in any market ever again. They will battle hard against Publix." To be sure, Harris Teeter is already making moves to fight off the new competition, according to Joel T. Murphy, president and CEO of New Market Properties, which owns a Harris Teeter–anchored, 69,000-square-foot shopping center in suburban Raleigh. "We worked with Harris Teeter to bring in a fuel center, and that's an important piece of the puzzle, because it drives traffic to the center. That's one of the ways they are going to respond," said Murphy. "They've also just completed a 15,000-square-foot expansion of their store and a complete interior remodel in anticipation of Publix coming. I think Harris Teeter and dominates the Northeast, and their customer loyalty is legendary. Harris Teeter has some of that in the Carolinas, especially in their higher-end grocery stores, and they are extremely well operated. It is not going to be easy to unseat them. And Publix is kind of the same thing as Wegmans in the South." Publix has gained the most traction recently, opening three stores in the Triangle in the past two years, with a fourth slated to open next year. Meanwhile, Lidl has broken ground on a site in Raleigh, and Wegmans is developing a 120,000-square-foot store in Cary as part of a mixed-used development planned by Columbia Development Group just north of CBL & Associates Properties' Cary Towne Center mall. In total, these developments will add an estimated 1.5 million square feet to the market's current grocer inventory of about 8 million square feet over the next few years. Coyne also has his eye on other recent entrants: Sprouts Farmers Market, Trader Joe's and Whole Foods. "It will be interesting to see how they fare, because even though they are organic, they are sort of in that middle

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