Specialty grocer Whole Foods is a good example of how retailers have adapted to the changing shopping habits of their customers. Just ask Taylor LeMaster, senior director with CASE Commercial Real Estate Partners in Dallas.
LeMaster was in the Chicago suburb of Rosemont, Ill., this week for TCN Worldwide‘s Central Region Conference. While serving on a panel, LeMaster talked about Whole Foods’ decision to open smaller-than-usual versions of its stores — as small as 30,000 square feet — in urban-infill locations.
And, as LeMaster says, Whole Foods is far from the only retailer to go small.
“Retailers are becoming more efficient,” LeMaster said. “They’re using smaller pieces of real estate to break into urban markets.”
This is a change. There was a time when retailers flocked to the suburbs. But today, vacancy rates are higher in the suburban areas of many big-city markets across the Midwest. This is true, for example, in the Chicago area, where TCN was holding its conference.
Retailers are looking at urban locations as the safer ones today. And to get into these locations, retailers often have to change the way they operate. This means fitting their merchandise into smaller locations.
“The growth in urban Chicago is exceeding the growth anywhere else in the Chicago area,” said Steve Frishman, a principal and vice president with with Oak Brook, Ill.-based Mid-America Real Estate Group. “For many years, the big-box retailers feared the density of the urban areas. That has changed. Retail is dragging in the outside areas. It is performing much better in the urban areas.”
The retail market has changd in other ways. The grocery market has become splintered, with consumers increasingly choosing specialty grocers like Mariano’s Fresh Market and Whole Foods over more established bigger-box brands such as Dominick’s and Jewel.
Frishman points to the Chicago area where the arrival of a new Mariano’s Fresh Market always makes news.
“Mariano’s is the big name right now,” Frishman said. “They become the talk of the town when they open up.”
At the same time that smaller specialty stores are thriving, big indoor malls are dying. And this is a trend that doesn’t look ready to slow.
Frishman said that in the Chicago area a large regional mall disappears every two to three years. Usually, developers scrape these properties and build something new in their place, often an outdoor power center.
