Tuesday, February 28, 2012

Supermarket Blight

Many urban areas have to deal with a problem of not enough supermarkets, especially in poorer areas. I've heard, but don't know if it's true, that Detroit doesn't have a single national supermarket retailer. In Boston, the North End (not poor by any measure) has been searching for a major supermarket for years. In DC, large portions of the center have no access to large grocers. This phenomenon is called a "food desert" and a lot of time is put into trying to lure retailers into under-served areas.

Fresno is not like that. Oddly enough, Fresno is jam-packed with huge supermarkets, many in very close proximity. Here is a list of most (I may have forgotten a few!) grocery chains that serve Fresno. This doesn't include small, local stores. All of the following brands are major chains with multiple locations in the area.

Savemart
Vons (Safeway)
Fresh and Easy
Food Maxx
Foods Co
Food for Less
Winco
Costco
Vallarta
El Super
R-N Market
Target
Wal-Mart Super Center
Grocery Outlet
Big Lots
Smart and Final



Indeed, there are so many supermarkets, and so many competing brands that some areas of the city suffer what can only be described as "supermarket blight" in which one supermarket abandons their existing store to open a newer, and usually bigger location nearby.

The blight comes because that old location is doomed to sit empty for a very, very long time. An empty retail space, especially of the size of the supermarket kills vitality. And worse, neglect has a way of spreading, making the entire strip center and then stretch of road seem blighted.

The most unfortunate part is, in a lot cases, the location sitting empty is actually be design.

I found this paragraph in am environmental report about the futre Clovis Wal-Mart Supercenter.

Also, both the former Save Mart and Von’s spaces have long-term leases in place and it is unlikely that these retailers would allow a grocer-oriented tenant to reoccupy the space, which is currently best suited for grocery tenants.
PDF page 44

This was hugely eye opening to me. All this time, I thought all those empty supermarkets were just a casualty of a weak retail market. I assumed the space sat empty because no one wanted to fill it.

But apparently, for many locations, that's not the case. The owner of the property is in some cases the retailer who has moved down the street to a new location. By holding onto the existing (empty) store, they block competitors from entering the market, because the most suitable spaces are not available.

So the blight is be design. Huge national retailers are spending money to block competitors, and they're hurting the neighborhood in doing so.

It even goes beyond that. We've all seen what happens when a strip mall (or even a traditional mall) loses its anchor. The rest of the mall struggles to attract customers, and many locations close. So when Vons decided to move 1 mile down the road, and they decide that their old location shall sit empty, to ensure competition can't come in, the rest of the strip malls declines. I wonder if this is also by design, because the chain will have more control over tenants in their new strip center.

Here is a real-story about this in action.

A month or so ago, I attended a planning meeting in Clovis about revitalizing commerce on Shaw. A business owner at the meeting complained that the abandoned Vons was hurting her business because the corporation was not providing any upkeep. The air of neglect, garbage and such, scared away customers, and it was hurting her business. I had assumed that Vons was holding the property because they couldn't get rid of it or find a tenant. After I read the above, I became skeptical of their intentions, but then last week I learned of something which confirmed that the owner of the former Vons was actually blocking any development in that center.

A call-center opened in that same strip-mall in 2010, taking over (what I'm told) was an abandoned Sears Outlet store. The call center used the wide open space for their setup, and quickly hired over 400 people. Those 400 people are great patrons to the many lunch spots in the immediate area.

Two years later, the company is looking to expand, and possibly grow to 800 people. The best solution for them would be to take over the old Vons, as that would allow them to keep their existing facilities (no moving costs) but add more agents as needed.

But the owners of the property said no. They don't want to lease out the property.

And so it shall sit empty, possibly forever. And now this company is looking to move to a suitable space they found in Fresno, taking 800 jobs with them, and abandoning their current location. All the surrounding retailers will be hurt greatly as many of their customers are forced into offices across town.

You can't script blight creation as perfectly as this scenario, but this is a true story. And apparently, there's nothing Clovis can do about it. They're about to lose 800 jobs because the owners of empty commercial space wish to keep it empty, depressing the entire section of town in the process.


Here is the center.
--A is the call-center. The red box includes the parking lot because I want to show that the majority of people in this center are employees of this location. The retail location south of the call-center is an empty fashion store, that was used by the call center to conduct interviews.
--B is the $3 theater. Always popular, but not something Regal will hold onto forever (judging by the complete lack of maintenance, the chain has no real plans for this spot).
--C is Ross.
--D is the old Vons, large and ready for a tenant. I highlighted the parking area in front and even behind the store. For whatever reason, this center was designed with a massive rear parking-lot - poor for retail, perfect for a call-center because employees could park in the back, and leave the front for Ross and Dollar Store patrons



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Now imagine it's 2013, the Vons is still empty, the call center has moved to Fresno, many of the retail spots (not shown) remain empty, or close because their customers leave, and Regal shuts their theater. That kind of blight is very, very hard to fix.





That's not the only way supermarkets can cause blight. I am a fan of the Fresh and Easy chain, but their expansion troubles have had negative effects on some commercial areas. Back in 2007, F&E bought up many parcels of land to build new stores. In many cases, those stores were never built. The result is an ugly vacant lot, some of which have been sitting there for 4+ years. As F&E owns the lots, and hopes to one day use them, no other retailer can come in. Like Vons, they are simply sitting on commercial property and no one else can use it.

Here are examples of Fresh and Easy parcels that have sat empty since 2007. For whatever reason, they're all by Walgreens.

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The final way in which supermarket blight emerges is when chains go out of business or pull out of the market, and their space sits unused. When Albertsons left the Fresno market, they left behind many old, less desirable stores. Half a decade later, those locations remain empty, and have a slim chance of ever being taken over. Supermarkets have very specific design requirements and so the unique structure makes it harder for other retailers to come in and adapt the building to their needs. A call center requiring a huge amount of space is a rare-occurrence, and most chains prefer to build their own boxes from scratch on vacant land.

This is an example I've used before, of an old Albertsons.


After the supermarket left, the rest of the strip center failed, leaving most of it empty.



Fresno is littered with at least a dozen old and empty spots like this.

The proximity to dense apartments hasn't helped this old Albertsons find a tenant. The non-standard placement (far back in the center) means it will probably always sit empty.

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Here's an example of a parcel in Selma that has sat empty for a very, very long time. Based on the interior design, this store was built in the 1950's. The city says the building is not stable, and so no one can lease it without putting significant money into it. Odds are, it will sit there empty for another decade or so. A bank was recently built in its parking lot. Because we know how "important" parking minimums are here, the elimination of parking is a clear message that the supermarket will never be used again.

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There's one other way in which supermarkets can hurt the liveliness of retail, and that's in the way their design involved blank walls with no windows. That's a whole other conversation.

7 comments:

  1. This "supermarket blight" is symptomatic of the greater problem of the lack of adaptability and re-usability of suburban-style development. Unlike traditionally-developed urban areas, where a warehouse district can become an artist colony, or an old bank a trendy grocery store, it's kind of hard to imagine a new use for a fast food outlet, drive-thru and all, situated in a parking lot; or another use for an old gas station.

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    1. This is very true. Re-usable development seems to end at Shields Avenue. It is hard to imagine a fix to this suburban-style blight (especially when developers continue to build new centers on the *new* edge of town).

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    2. There has been some re-use, but it's always of the low-income kind. Like an RV close-out (reposessed) dealer taking over an old Kmart, or a market taking over an old department store.

      Things like fast-food outlets are so cheap that they get knocked down and rebuilt all the time. Mcdonalds recently demolished and rebuilt around 5-6 of their local stores in something like 4 months.

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  2. Very interesting perspective on the Fresno Commercial Retail market. I actually creating all of the marketing brochures for the centers in this blog post. The brokers are looking to fill the space, but the landlords won't accept reasonable offers. Most grocery stores have very long leases (with options to renew), which hurt the center. I find it rather misleading to publicly advertise a stripcenter inline retail space or pad for lease without making it known that the Grocery Anchor will be empty for X number of years. Small businesses go into these spaces, with false promises that the grocery anchor will be filled 'soon'. To back this up, the brokers advertise the grocery space for lease. It's a cyclical process of dishonesty.

    On another note: The new car wash on Palm and Bullard is finishing up. There are many spots for street-facing windows. However, the owner opted to fill these spaces and created a very large empty wall.

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    1. Thats interesting that many of those small businesses may have been misled about the future of the strip center. If that's true, and the owners could prove they would misled, that might be an easy lawsuit to win.

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  3. This is not only a Fresno issue, we see it all the time here in NJ. I don't understand why the taxes don't inhibit this kind of development. It must be a financial loophole that enables this to happen.

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    1. Id love to do a detailed analysis of how tax policy encourages this kind of thing. But then Id go insane. So Ill leave it for someone else to tackle.

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