Supermarkets increasing their presence in power centers

Shopping Centers Today, an ICSC publication, recently published an article explaining that U.S. developers are changing the traditional shopping center retail mix by moving neighborhood stores - namely grocery retailers - into power and lifestyle centers. The article says that the ground was broken about a decade ago by stores like Costco, Target and Walmart, all of which offer supermarket shopping in a warehouse style or as a supplement to discount retail.

Several trends were cited for the changing retail mix, including the significant drop off in neighborhood shopping center development as well as the recent expansion of smaller-format, natural and organic grocers. More grocers and less neighborhood shopping centers being built means that these new formats have to go somewhere other than neighborhood centers.

The trend may be troubling for traditional supermarkets like Kroger, ShopRite, Giant and others. It's much easier for a 15,000 - 25,000 square foot small format grocer to find a spot in an existing power center than it is for a 50,000 - 100,000 square foot store.

In addition, power center owners have realized that customers typically visit grocery stores at least twice per week, and the increased visits benefit all tenants. An added benefit to landlords has been the resulting cap rate compression brought on by the addition of grocery retail.