GHQ Cover Story 09/05 – Space Quest
By George Anderson
Location is still the name of the game in retail. As anyone in the business can tell you, finding
the right location to build a store can be as critical to the success of the location as what you put in it.
Rich Savner, director of public affairs for Pathmark, told Grocery Headquarters his company does its homework assessing local demographics, density counts, competitors, vehicular and mass transit access to the site and other factors.
Mr. Savner said many factors are taken into account. “We look at things like, is it going to be a limited trading area because of barriers like a river, or would we be cut off
because we were on a divided highway without a jug handle or traffic light?”
Shelly Sponholz, senior vice president of real estate development and asset management at Giant Eagle, said the Pittsburgh-based grocery chain looks for locations that “include a strong demographic profile, ease of access and the opportunity to construct a prototypical store with fuel and pharmacy drive-through capabilities. When selecting a shopping center location, we prefer the co-tenancy of other non-competing anchors such as Kohl’s, Home Depot or Lowe’s.”
John Connolly, president of the commercial developer MGM Realty, said other factors are also considered by retailers in choosing sites to put up stores. “A retailer can be a pioneer and go out and look at the outskirts of areas under tremendous growth, like Chester, Berks or Montgomery counties [outside Philadelphia]. I’m watching Giant-Carlisle make some moves to keep Acme from taking its market share by putting two stores within a mile and a half of each other,” he said, adding, “It’s better to cannibalize yourself than to let some competitor do it.”
The hunt for prime real estate is often complicated by cost and other factors, such as a chain’s reputation in the market and its relationship with companies that develop and own shopping centers.
“We always prefer to be with the market leaders. It just provides greater stability,” said Terry Brown, CEO of Edens & Avant, an owner, operator and developer of strip shopping centers.
Cost for real estate, according to sources who spoke with GHQ, is increasing by more than 10 percent a year. The high ticket of acquiring space has forced many operators to look for other areas where costs can be reduced.
Peter Tlumacki, president of Northeast Store Development, said some retailers make a proposal “to go in with a base rent, a lower rent… if sales increase by a certain percentage, the rent would increase by a percentage. The landlord would benefit by the store doing well and having more interest in keeping the shopping center up.”
MGM Realty’s Connolly said, “Often it makes sense to jump into an existing facility, retrofit it yourself and get that store open to block out the competition. A new store takes at least nine to 12 months, whereas by recycling an existing store, the doors can be open in as little as 90 days.”
Moderator’s Comment: Which companies in retail do the best job of assessing real estate? What are the challenges faced by retail real estate development
departments and how are they coping? –
George Anderson – Moderator