CSA - Sept/Oct 2021

Page 36


The Rise of Essential Retail Centers

Why are brands like Sleep Number and Ulta expanding into neighborhood centers? Three reasons: steady traffic, closer contact with customers, and last-mile delivery ability. By Al Urbanski

It’s Monday Night Football, Lions vs. Packers. Publix itself is an important owner On ESPN2 Peyton and Eli Manning are exof grocery-anchored centers perimenting with a new way to call a football game. Aldi, meanwhile, is sponsoring the broadcast with a spot that highlights its new slant-roof stores (just like Lidl’s) and ends with the tagline, “You can’t let your friends spend too much on groceries.” It’s a newnew-wave merge of 21st Century football and 21st Century retail: a pair of Super Bowl QB brothers changing the way football games are broadcast supported by a growing supermarket chain pledged to provide essential goods at low cost. COVID-19 shined a bright light on groceryanchored centers. With enclosed shopping centers largely shut tight in the height of the pandemic, supermarkets in smaller neighborhood centers met the needs of consumers within three-to-five-mile radii and their owners held on tight to them. Investor’s acquisitions of grocery-anchored centers declined to a deal total aggregate competitor Lidl for space in thriving neighborhood centers of $4.5 billion in 2020, a 26% drop from 2019, according to CoStar, Longtime leaders of the supermarket business had record years. a commercial real estate information provider. This year, the transKroger reported an increase in net income from $1.66 billion in 2019 action volume rose to $6.1 billion, very close to 2019’s total. to $2.56 billion in 2020, according to First National Realty Partners, Aldi will be showing up in neighborhood centers both existing and and Albertson’s net income nearly tripled to $1.89 billion. new in the years ahead, as new neighborhoods themselves continue “Any business that was deemed essential during the stay-at-home to take shape in high-growth states in the West and the South such mandates was able to remain open for business and pay rent. That as Washington, Arizona, Texas, and Florida. With 2,100 stores, Aldi caused buyers of retail assets to become more focused on groceryis on track to become the third-largest grocery retailer by store count anchored shopping centers as a hedge against any future lockdowns by the end of 2022. And just out of the gate with 18 stores, Amazon and increasing inflation,” said Kevin Fryman, executive VP of Hanley Fresh is likely to be competing with Aldi and its fellow German Investment Group, which provides market information, and brokers retail acquisitions and dispositions. Non-essential retailers, too, including Ulta Beauty, Sephora, and Sleep Number—mall and urban retail tenants—increased their presence in grocery-anchored centers “We’re adding between 15 in vibrant neighborhoods to give them closer access to their and 20 outparcels a year. Our best customers. larger tenants have been very “What brands like Sephora and Ulta are increasingly recognizing is that you cannot beat the foot traffic generreceptive to this.” ated at shopping centers like the ones we own,” said Bob —Brian Finnegan, VP of leasing at Brixmor Myers, COO of Phillips Edison & Company. “The average 36

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