In late December, 72 Dominick’s stores in the Chicago area closed forever. The disappearance of the 95-year-old chain left customers confused, employees jobless, and commercial brokers scrambling for solutions.
Dominick’s is just the latest shockwave in a long, industry-wide upheaval. Many experts claim the supermarket as we know it may be dying.
And, just as commercial brokers need to have ideas ready in case Sears and J. C. Penney fail, you should know how to take advantage of these seismic shifts in the food retail landscape. Because if you don’t have the answers, someone else will.
A radical new concept.
The Rise and Fall of the Supermarket
The supermarket was a radical new concept in the 1930s—dry goods, produce, meat and dairy all under the same roof, with plenty of free parking. With more American families owning automobiles, it just made sense to get everything in one trip. By the 1950s, the suburban supermarket had conquered food retail.
But supermarket margins were always razor thin, and competition was relentless. National chains owned most stores by the 1990s, and demographic changes challenged the status quo.
Traditional, full-service supermarkets were attacked on the low end by no-frills discounters, warehouse clubs and major chains like Walmart. At the high end they lost business to upscale grocers like Trader Joe’s and Whole Foods. Growth stalled, losses mounted, and eventually Dominick’s paid the price.
Not such a happy new year
for more than 6,000 Dominick’s employees.
for more than 6,000 Dominick’s employees.
Aftershocks
From a commercial real estate viewpoint, it isn’t hard to imagine the impact of a supermarket closing. The immediate effects of the Dominick’s shutdown include:
Sharply lower mall traffic. Even if another operator replaces a Dominick’s immediately, the space can be vacant for a month or two—long enough to force smaller retailers to close or relocate.
Lower rents. In malls where Dominick’s is not replaced within a few months, owners may have to slash rents to keep other tenants.
Unemployment. More than 6,000 Dominick’s employees lost their jobs on December 28. (Happy New Year!) While many may get jobs with new operators, areas near closed stores will still feel a disruption in purchasing power.
Who will take over Dominick’s locations?
Good questions
There may not be another chain-wide closing like Dominick’s in the near future, but individual stores can close or change hands any time.
Property owners and site selectors will need answers. You should be ready with them.
In Chicago, rival chains like Jewel and Mariano’sswooped in to buy some Dominick’s locations. Real estate investment groups pursued others, while others may stay vacant. Who makes these decisions, and what factors do they consider?
Why did upstart Mariano’s—founded by the former CEO of Dominick’s—snatch up some locations while ignoring others in similar suburbs?
Will out-of-state chains like Kroger or Hy-Vee seize the opportunity to plant stakes in the Chicago market—and where?
How did Jewel finally defeat its longtime nemesis?
Answer these questions, and you’ll have answers when the next shockwave hits.
Will more Chicago neighborhoods become food deserts?
Walkability and food deserts
Dominick’s locations in Chicago’s urban areas raise even more possibilities.
Locations in upscale neighborhoods—where the ability to walk to the store is a 180-degree flip from the “driveability” that once made supermarkets so popular—won’t be empty long. But poorer neighborhoods that lose a Dominick’s are in danger of becoming food deserts.
A food desert is a lower-income area where residents without cars lack access to decent food shopping—forcing poorer people to actually spend more money on their basic diets than wealthy people. The USDA keeps track of these areas, and governments from the federal level down offerincentives to build supermarkets there.
Connect with your local economic development organizations, and you’ll be ready with one more answer when the next supermarket goes dark.
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via:http://www.brokersavant.com/supermarkets-dying-can-commercial-brokers/
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