Texas Real Estate Business magazine covers the multifamily, retail, office, healthcare, industrial and hospitality sectors in Texas.
Issue link: https://texasrealestatebusiness.epubxp.com/i/817755
48 • May 2017 • Texas Real Estate Business www.REBusinessOnline.com ban and suburban areas. According to Sim- mi Jaggi, senior vice president in JLL's retail brokerage di- vision, this balance enables grocers to customize new lo- cations to existing market character- istics, rather than gamble on an influx of people that may or may not come. "In urban settings, we see grocers getting smaller and more agile, in some cases going to a vertical, multi-story layout," says Jag- gi. "But in suburban markets, we see grocers generally getting bigger." Even in urban settings, when land constraints become a bigger factor in site selection, ultimately it's the de- mographic analysis of the area that dictates size of the project, says Jaggi. Basing store size on population vol- ume generates a high level of sales per square foot, a key metric in evaluating the performance of grocery stores. "The true, key factor in the site selec- tion process is density of population," says Jaggi. "After that, it's a prime intersection in the middle of a dense population. That's what it all really boils down to, because in the grocery business it's all about sales volume." In addition to playing into demo- graphics, Texas grocers are able to build and lease locations that mesh with their brand images. Traditional grocers like Kroger and H-E-B can go bigger, enhancing their appeal to one- stop shoppers. Specialty grocers like Trader Joe's, on the other hand, can go smaller, solidifying their images as niche retailers with high-quality, private-label offerings. Jason Baker, founding partner of Houston-based retail brokerage firm Baker Katz, credits this trend to the efforts of traditional grocers such as Kroger and H-E-B to diversify their product lines and service offerings. "Twenty years ago, Kroger and H-E-B were doing 25,000- to 35,000-square foot stores," says Baker. "Now, both grocers are at or above 100,000 square feet because they're offering every- thing from furniture and extended pharmacies to shoes and haircuts, not to mention stores that now have full restaurants operating inside. The will- ingness to experiment is driven by the significant foot traffic they generate." As for the specialty chains, adds Baker, their movement toward smaller store spaces stems from a willingness to locate stores closer to one another, a byproduct of expanding into more densely populated urban spaces. But flexibility, by definition, goes both ways. Not all big stores are get- ting bigger, nor vice versa. According to David Livingston, an independent researcher and site se- lection consultant for supermarkets, some chains are rebelling against their traditional formats and brand images simply because a given target market demands it. "Small formats like Aldi have been getting somewhat smaller, and large formats like Walmart have been devel- oping smaller stores to better fit small- er markets," says Livingston. "Target has also been developing smaller ur- ban formats for more densely popu- lated cities. Basically, supermarkets will fit the store to the market." One Game, Many Players With great population growth comes great competition. Specialty grocers like Sprouts Farmers Market and its subsidiary, Sunflower Farmers Market, have been expanding in Texas since 2002, the year both chains were started. Then there is upscale organic grocer Whole Foods Market, which is based in Austin. These companies rank first, fourth and eighth, respec- tively, on Chain Store Guide's list of the 50 fastest-growing grocery fran- chises in the United States, based on five-year unit growth. Despite the successes of these gro- cers, consumer trends still seem to favor the big players. According to a 2016 study by Food Marketing In- stitute (FMI) and food and beverage consulting firm The Hartman Group, the average shopper makes 1.6 trips to the grocery store per week, spending about $100 per trip. In such an environ- ment, one-stop shopping marts with low price points retain the advantage. GROCERY WARS INTENSIFY IN TEXAS GROCERY from page 1 Walmart operates 329 locations in Texas, which is the most of any state and nearly as many as its combined locations in California and Florida. For sponsorship information, contact Mike Jax: (713) 594-2000 • mjax@francemediainc.com For sponsorship information, contact Scott France: (404) 832-8262 • scott@francemediainc.com For registration information, contact Alicia Lewis: (404) 832-8262 • alewis@francemediainc.com www.interfaceconferencegroup.com/drr2017 JUNE 20 « 11:30am-2:30pm « FOUR SEASONS HOTEL DENVER Presents... The annual InterFace Denver Retail Real Estate Conference will discuss the changing retail environment and its effect on Denver Retail. Hear from the most active retail players from the Denver area on how they see retail growth and opportunities. Plus learn who is leasing, building, buying, selling and financing Denver retail. If you invest in or finance retail real estate, this will be a can't miss event! InterFace DENVER RETAIL REAL ESTATE Conference Simmi Jaggi JLL