The ICSC Overview, Part III

Clark, N.J., supermarket industry consultant Matthew Casey and M&T Bank’s Michael Weinstockon the ICSC second-day outlook panel

Continuing with Part III of the outlook session from today’s International Council of Shopping Centers' national conference (the previous part is here):

Moderator Chase B. Welles, a partner in the Shopping Center Group, a real estate firm focusing on retail development based in Atlanta, led the panel through a discussion of store layouts. 

The participants emphasized that adaptability is key.  

Consultant Matt Casey said foot traffic is essential in an urban environment, and retailers can’t count on customers descending below ground, which traditionally has produced lower yields than ground floor. 

But he quickly added that “you can throw that all out with the Columbus Circle Whole Foods,” where patrons take down escalators to get to the goods—and which Casey said was the chain’s best performing outlet.

The point, said Casey, was that “there are no set rules now when it comes to retail, especially supermarkets.”

Still, Equity One’s Tom Caputo said that the first floor remains the highest value and provides  the most sales, followed by the mezzanine, with the basement usually behind.  To account for that, at the Westbury, Long Island mall, he said the firm has emphasized “plenty of vertical transportation,” with multiple lifts and escalators, piggybacking on shoppers’ familiarity with the nearby Roosevelt Field mall.

Fairway's Aaron Fleishaker said his company's experience is that ground floors are more valuable, but he said below-ground spots that are well built can compensate.  He said the former Circuit City story at 240 E. 86th St. had high 15-foot ceilings that were good for Fairway's Upper East Side expansion.  But he said below-grade spaces often are burdened by lower ceilings, less space, and intrusive columns.

The panel appeared to agree that customers now prefer to go downstairs for shopping, rather than ascend.

Fleishaker said that convenience is a factor in design, but he said New York real estate means New York customers will put up with multilevel stores.  They are a "fact of life"--and costly because of elevators and escalators--"but worth it."

He said he was "very skeptical" of such setups in the suburbs.

The panel discussed the need for better inner city supermarket choices to avoid what moderator Welles called food deserts.  Matt Casey said that research strongly supported the new Whole Foods store that is coming to W. 125th St., as well as Newark, N.J., which will get a Shop Rite store too.

Welles asked if other retailers would follow to Newark’s retail-deprived inner city, noting that some inner cities are "entire retail deserts." Casey pointed out that Detroit’s Whole Foods has led to a small renaissance in its immediate area.  "Whole Foods sees incredible opportunity to grow their chain in tough neighborhoods," said Casey, and added that other stores may indeed follow. 

Fleishaker indicated that Fairway Market takes pride in its Harlem stronghold.  "People are waking up to the fact that these areas are gentrified.  Real estate is already expensive in these areas."

M&T Bank’s Michael Weinstock said that urban logistics are challenging and need to be addressed.  He said that BJ’s Warehouse had a problem in its first Brooklyn location keeping the shelves stocked, which it adjusted to when it opened a second store in the borough in Canarsie. 

Matt Casey said that Target is missing an opportunity with its prominent Atlantic Center store in Brooklyn, over the city transportation hub. He said it stocks good deals on expensive chocolate, for example, but it hasn’t installed its now-familiar fresh food operations into the Atlantic Yards-area venue.  “The store is doing very well due to a lack of competition,” said Casey, “but it doesn’t fit the neighborhood,” and with food it could be better performing.

Aaron Fleishaker said, “You can micromanage [the stores] to the communities you move into.”

Next in our concluding Part IV, the threat to bricks and mortar ....

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