A Taste of Grocery-Anchored Centers
Michael L. Campbell
Director of Business Development
WS Development Associates LLC
Cathy Johnson, CSM
Associate Director of Property Management
Vice President of Marketing & Market Research
Senior Vice President National Projects
What does specialty retail in grocery-anchored centers look like? What advantages do these centers offer? We take a look.
We all visit one—a neighborhood shopping center anchored by a flourishing grocery store, a dry cleaner, a fast food restaurant, a card shop and occasionally, a temporary tenant. Specialty leasing in grocery-anchored centers isn’t very tricky. In fact, given the volume of repeat foot traffic, and street visibility it is worth a serious look by all temporary tenants.
Definitions and distinctions
Cathy Johnson, Associate Director, Property Management at Weingarten Realty Johnson, with Weingarten Realty says: “The centers we develop and manage are more accurately described as neighborhood centers, grocery-anchored centers, power centers, and strip centers. Some of these centers are made up of a number of destination stores.”
Grocery-anchored or neighborhood centers are distinguished by the following characteristics:
- Typically open-air strip centers
- High visibility due to frequency of visits and high volume of traffic driving by
- Draw customers from a 3-5 mile radius
- The strength of the grocer, like the quality of a department store anchor in a traditional shopping center, determines the traffic draw for the entire center.
- The merchandising mix is distinguished by retail and service components. The service component is a much higher percentage than a traditional mall.
Why it works
One of the key advantages of a neighborhood, grocery-anchored center is its large daytime population. These are serious shoppers who regularly visit the center and typically live within its primary trade area (3-5 miles). Think about it: How many times a week do you visit your local grocery store? The average shopper visits once or twice a week. Johnson, with Weingarten Realty, says that “customers frequent these centers several times a week because they are visiting the grocers, the nail salons, the dry cleaners, the restaurants, the coffee houses for all the day-to-day services and activities that people need to tend to their daily lives.”
Scott Prigge, Senior Vice President of National Property Operations, at Regency Centers, agrees. He says one of the key advantages of the neighborhood grocery-anchored center is the “high frequency of both foot and vehicular traffic. We have on average, 18,000 weekly shopper visits and the visibility of our centers by drive-by traffic is tremendous,” Prigge says.
Given these statistics, the key is to keep specialty retail merchandising fresh and focused on the needs of the frequent shopper. Some neighborhood centers also have a lifestyle and entertainment component. Successful temporary retailers take advantage of the co-tenancy and cross-shopping offered by these centers. These synergies and the built-in traffic make temporary leasing work.
The variety of temporary tenant uses for these grocery-anchored centers is wide and includes everything from consignment shops, dance studios, antique dealers and retailers who have a weekend-long or month-long sale event; national kiosk retailers; tent sales (in the parking lots); and office users who don’t want to be tied to a long-term lease.
“Our focus is on tenants who need high visibility to large numbers of people and traffic; they need larger square footage than what a kiosk could offer; they cater to the local customers versus the tourist traffic. When targeting prospective tenants, we try to identify what the customers at the centers may be [looking for] as well as the possible start-up business that would benefit from the tenant mix and location of the center. Many tenants are not selling a single product like a kiosk tenant or one that would normally be seen in a mall. In some cases, we have tenants who do business out of tents in the common area and parking lots,” Johnson says.
Prigge, with Regency Centers, views temporary leasing not merely as a function of store vacancy, but as a way to monetize real estate from parking lots: cell phone repeater units on rooftops; to the ATMs in the common area. As for other temporary tenants, Prigge says he looks for local tenants. “It gives the center some local flavor and you can find something different,” he says.
Whitney Kantor, Vice President of Marketing and Market Research at Regency Centers, in Jacksonville, Florida, says that many such neighborhood centers are well known in their community and by partnering with local galleries, schools and charities they build a deeper connection. “The win-win is that these groups get exposure from the traffic at the center and the center adds a trendy or well respected merchant to the mix for a short period of time versus having a vacant space,” Kantor says.
Kantor adds that the types of prospects the company looks to fill temporary locations in its portfolio include: bike stores, book stores, art galleries, consignment shops, tax preparation companies, community events and antique markets. Kantor says she found additional leads, such as Halloween retailers and fireworks stores, at SPREE.
Service-oriented temporary tenants could include teeth whitening; brow threading, car detailing, and massage shops. These retailers should consider the hybrid neighborhood center because they can harness that centers’ high traffic.
Michael Campbell, Director of Business Development at WS Development Associates LLC, is looking for retailers who are “additive” or complementary to the strategic merchandising mix of a center and/or “passionate operators with a stable financial footing.”
“Summer is a very important season [for] open-air centers and we attract ‘beat-the-heat’ uses like Del’s Frozen Lemonade and a New England staple, Ritchie’s Italian Ice.” WS Development has also had success with pop-up stores such as Title Nine’s Four-Day Blow Out Sale and a Salon and Spa Expo. Campbell wants to see more local retailers join the temporary tenant mix in these types of properties.
Campbell, like most of his counterparts who lease and operate in the grocery-anchored real estate area, has had success with temporary stores during Halloween and Christmas season, and tenants who are good fits for Valentine’s Day, Easter, Mother’s Day and Back-to-School.
WS Development offers competitive rents and extensive marketing efforts that help get the word out about new store openings or sales events. Campbell has successfully presented his case to Hickory Farms, See Candies and Calendar Club, in addition to a whole slew of temporary retailers.
Specialty retailers who are considering leasing a short-term location in a neighborhood grocery-anchored center should be aware of several things before taking the plunge: How will I market this space? What is the condition of the space and what are the associated costs to open the doors for business? Will I be required to produce professional signage and banners for the storefront? What are the costs of insurance? Does the grocery store have any lease restrictions or exclusives, i.e. pumpkin patch sales? Temporary retailers also need to understand that if the space gets leased permanently they may have to move on.
“One of the keys to success is making the concept easy for the multitasker who is running errands and checking things off their to-do lists. It is important to keep the concept fresh, rotate or introduce new merchandise offerings regularly to keep the large daytime population that feeds the grocery-anchored center coming back,” Campbell says.