Shopping Centers Today is the news magazine of the International Council of Shopping Centers (ICSC)
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dication that the grocery sector is going through a significant change." The Sep- tember JLL retail report also cites a raft of other examples from the past couple of years, including Albertsons' $385 million purchase of United Supermar- kets; Kroger's $2.6 billion acquisition of Harris-Teeter; Safeway's closure of 72 Dominick's stores in Chicago; and Yucaipa's acquisition of 150 Fresh & Easy stores. The Dominick's closures resulted in the return of some 4.5 mil- lion square feet of space back into the Chicago market and spiked local retail vacancies by about 80 basis points, ac- cording to the JLL analysis. Does this instability mean that traditional supermarkets will shrink dramatically along the lines of "right- sizing" retailers such as Best Buy? Not necessarily, Prevor says. "It is a possi- bility, but I believe it is just as possible supermarkets will further evolve," he said. Already, major chains are ramp- ing up their focus on fresh and pre- pared foods around the perimeter of the store by installing foodie-friendly cheese caves, wine bars, mini-restau- rants and more, according to Prevor. "Some supermarkets are transforming themselves into hybrid food-service and retail emporiums," he said. "This actually holds out the possibility that some of these stores could get bigger. That way, they can have food courts and other things that we haven't tradi- tionally associated with supermarkets." Chains could simultaneously con- front discounters by adding the types of products found on the cheap at warehouse clubs, Jaggi says. "Do you have to go to Costco to get that gi- ant pallet of paper towels?" he said. "Maybe not — maybe Kroger starts carrying that." By offering touches of both Costco and Whole Foods, in other words, supermarkets stand to broaden their appeal. "All these major brands, whether you're talking about Kroger, HEB or Publix, are trying to appeal to as broad a demographic as possible," Jaggi said. "They want their stores to appeal to discount-oriented consumers, aspirational consumers and affluent consumers alike." Landlords could employ a similar strategy when retenanting shopping centers that have lost large-format grocery anchors owing to sector con- solidation, Prevor says. Instead of a single grocery anchor, the shopping center could offer multiple highly spe- cialized food tenants that occupy in the aggregate roughly the same square footage as the departed anchor. "One tenant might be a deep-discount con- cept like an Aldi, another might be a health-oriented, upscale concept like Whole Foods," Prevor said. "You could also have an ethnic-food store focused on Asians or Latinos. So the model moving forward might be for multiple 10,000- or 15,000-square- foot stores instead of one 60,000-foot store. The design of these centers could change." I n d e e d , t h e J L L r e p o r t d o e s predict continuing closures of tra- d i t i o n a l s u p e r m a r k e t s o v e r t h e n e x t t h r e e y e a r s a s a l t e r n a t i v e channels — particularly dollar stores and fresh-format grocers — expand F e b r u a r y 2 0 1 5 / S C T 35