Is There A Trend For Supermarkets To Become Regular Tenants In A Regional Mall? Don't You Believe It

This column, Strolling the Agora, will continue to be written as the mood hits even though Shopping Center Digest has ceased publication

By Murray Shor

Been hearing a little rumble here and there about supermarkets becoming important tenants in regional malls, taking advantage of the large number of big-box vacancies available and seeing that as an opportunity to expand their base. Don’t you believe it.

I don’t doubt that in some isolated instances it could happen, such as discounter Aldi now
taking several locations in the Chicago market. Nor do I dispute that some surveys report those in a trade area may put a supermarket high on their list of tenants they’d like to see in their neighborhood mall.

However, what people say is not what people generally do, especially when answering a survey. But, go on to reality.

First, people shopping for their weekly groceries are not going to push a shopping cart loaded with perishables such as meats, frozen foods, milk and butter through a mall while checking out the latest fashions at Victoria Secrets or Ann Taylor. Nor would any of these stores want a customer browsing through the racks with a cart of melting ice cream.

And maneuvering those carts up an escalator?

Little Cross-Shopping

Result: There would be very little cross-shopping—even if the mindset were there. Supermarket shopping is a chore; mall cruising and browsing, entertainment—except, maybe during the stressful holiday seasons. Just one minor reason mall landlords may not welcome these tenants with open arms.

Now get into the logistics, for a moment—and the high value placed mall management places on parking spaces, especially those nearest to store access and the main entrances to the main mall. Supermarkets require heavy traffic, and their customers require substantially more parking spaces than those normally shopping at a mall; the distance between the car and store has to be substantially shorter. Question: Know anyone willing to push a loaded cart 200 yards to a parked car?

Then comes the large number of 18-wheelers coming in to replenish a supermarket
on a daily basis; this traffic is much heavier than similar vehicles replenishing merchandise for other tenants because some stock turns at foodstores go into double-digits; some departments require daily replenishment. These vehicles have to be kept away from the large numbers of personal SUVs; the result is a completely different and more demanding traffic pattern.

Those adherents saying it’s a good idea for this type of tenant to head for the malls point to some of the big-box discounters, warehouse clubs, and other promotional merchants carrying groceries who are already common in malls—Target, CostCo, Walmart, BJ’s, and the like. Yes, they carry groceries among their merchandise, but not a full-line of products: meats, fresh fish, frozen foods, produce, etc., etc.

It’s true that some of these big-box users are attached to the mall, but many of them do not have direct access, and their parking spaces essentially just serves their stores. In this situation, a supermarket could be a likely candidate to take the space.

We’re talking here, however, of a supermarket being an integral part of the mall, rather than an add-on.

How It Can Work

Supermarket operators are not known for paying high rents. The average mall rent paid across the nation for non-anchor tenants is around $38 per sq. ft. And to this add one-third to cover the CAM charges and other ad-ons—another item supermarketers are not known to contribute to without complaint. If you know a supermarket chain willing to pay those dollars, lemme know and I have a number of great mall locations they should look at.

No way these experienced, tight-fisted operators would agree to these expenses, and whatever else may be included in the Reciprocal Easement Agreements made between the owner-developer and the department store anchors.

Landlords do understand supermarket customers hit their shopping centers on a weekly basis, much more frequently than they would if it were a regional mall. So they’d like to build on this loyalty to place and bring the customer to their properties more frequently. This is why many malls have a separate, service-oriented strip center next to their major malls, and containing a supermarket, maybe a liquor store, barber shop/beauty parlor/nail salon, stationery store, dry cleaner, and the like.

Separate access, but visible, lower rental and operating costs than locating in a mall, less hassle for shopper merchant and landlord, and a win-win for all concerned.
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Other Interesting Activity

American Theatre Corp and Cinema Grille are looking for big-box vacancies in shopping centers that are suitable for theatre use. Contact David Postle, depostle@msn.com .
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Doctors Express, a health-clinic franchise based in Towson, MD, recently made some 74 franchise agreements in 21 states and expects to have 35 operating by year-end. A visit to a hospital’s Emergency Room costs about $575; at DE’s urgent-care centers, the cost is about $125.

Sites are being sought mainly in community and neighborhood centers. Contact Jennifer Watson, Baum Realty Group, Jennifer@baumrealtygroup.com .

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JC Penney Co says its new-store expansion over the next five years will be targeting mall and off-mall locations, and expects to boost its sales by $1 billion over the next five years. It had opened about 150 of these units before the recession hit, and has an ongoing program to complete renovations of about 400 units by the year 2014.

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General Growth Properties will no longer have a member of the founding family, the Bucksbaums, since brothers Martin and Matthew built their first center in their home town of Cedar Rapids. Those running the bankrupt development company chose not to give Chief Executive John Bucksbaum a seat on either of the two new boards being created; the reason given is that he failed to inform them that the family trust failed to inform them of the $100 million of loans made by the family trust to two GGP executives to cover margin calls on their company stock.

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More information on Expanding Retailers, Directory of Major Malls, and products that can improve your dealmaking, marketing, and operations may be obtained from our website, www.shoppingcenters.com .