How many times have you walked or driven past a grocery-anchored strip center and been surprised? Never. It’s the same old, same old … year in and year out. But you may not have realized that this half-century old phenomenon is perhaps the most consistently profitable model in today’s ravaged shopping center sector.
You may have also missed some significant news in the grocery-anchored (G-A) sector this spring, which slipped beneath the radar of most mainstream media (except for the prosaic supermarket and finance industry trades). Two of the largest owner/developers of grocery-anchored centers – Kimco Realty Corp. and Weingarten Realty Investors – announced plans to merge into a single real estate behemoth encompassing 559 open-air G-A shopping centers in major markets across the U.S.
Together, these properties occupy about 100 million square-feet of gross leasable area (GLA) – one of the largest conglomerations of open-air shopping center space in the country. The financial markets rallied behind the merger, boosting Kimco’s stock value by almost 25 percent during the two months following the announcement. (Kimco will be the surviving company.) It seems that “grocery-anchored” — perhaps the most commonplace mall configuration — is now the favorite flavor of retail real estate investors.
What’s Going on Here?
Well, it turns out that, post-pandemic, grocery-anchored centers offer virtually all the attributes sought by today’s wary, post-pandemic consumer:
- Grocery-anchored is an outdoor phenomenon: delivered in plain air, with easily accessible parking and clear pathways to a full range of retail options. While many G-A centers are subdivided into a main structure and multiple out-parcels, all destinations are clearly visible and easily walkable. No need to wander down seemingly endless concourses or agonize over complex floor plans.
- G-A shopping centers average 2.5-3 customer visits per week: well above the footfall of most enclosed malls, as consumers return to the same center up to thrice weekly to replenish their refrigerators and pantries.
- G-A centers provide services which can’t easily be accessed online: salons, dry cleaners, gyms, urgent care facilities, pharmacies and of course restaurants. Many of these strip centers also include post offices, public libraries and delivery services – bringing consumers back again and again for their everyday offline needs.
Strip Mall Renaissance
Ironically, the tried-and-true grocery-anchored sector has been an early adopter of the transformation of shopping centers into dynamic open-air live, work, shop and play environments. Kimco’s headquarters center in Jericho, NY, incorporates all the usual retail suspects — as well as a sizeable office structure, a historic restaurant, and a kids-oriented colonial theme park. A hotel and conference center are in the development stage. No walls to tear down, no costly demolition – just lots of excess parking space available for the taking.
Grocery-anchored centers are also exceedingly economical real estate propositions. No need for climate control (nature provides that), costly common area maintenance or high-level security. Beautification is largely accomplished through attractive landscaping and plantings – perhaps a water feature here and there.
Since the grocery-anchored concept is so timeworn and well-proven over many decades, I have often wondered why enclosed mall operators in the U.S. don’t adopt at least part of this strategy. For example, it is quite commonplace throughout Europe to see supermarkets in enclosed shopping malls. Customers benefit from the additional convenience, and mall owners gain from higher levels of customer frequency. How about a library, or an open-air park or recreation space where once dwelled an outdated department store? After all, most enclosed malls today have oceans of unused parking space – so why not put it to work?
Too often, real estate – particularly retail real estate – becomes pigeon-holed into outdated models which no longer benefit the consumer. It’s way past time to combine the best features of both “enclosed” and “open air” properties in the U.S. – and for enclosed malls to benefit from the long-proven customer attraction of the humble grocery store.