MARLTON, NJ—Greentree Square, a 110,000 square-foot center at 940 Route 73 in this Burlington County bedroom community about 15 miles east of Philadelphia, hosts one of Whole Foods Market’s 18 New Jersey grocery store locations in the 92-percent occupied center.
With Amazon’s acquisition of the chain, announced in June and completed in August 2017, the online retailer is likely to create new competitive pressures on grocery anchored neighborhood centers around the Garden State, according to Richard Kalvoda, senior executive vice president, advisory, of Altus Group, a commercial real estate analytics, valuation, and consulting firm. Kalvoda focuses on real estate valuation for retail, office, industrial, and multifamily properties.
“To this point in the retail industry, most of the impact of the shift to online retailing has been felt by the power centers and the regional malls, particularly the non-dominant regional malls,” he says. “You’re more likely now to see that impact to neighborhood centers as well.”
Listen to the complete audio interview with Richard Kalvoda in the player below.
Neighborhood centers are likely to see pressure on pricing if existing grocery stores in those properties struggle to compete with the Whole Foods-Amazon combination, Kalvoda says.
“Every space that Amazon gets into, they become a very formidable competitor, they create a lot of efficiencies with logistics, so given that you’re going to see pressure on other grocers,” he says.
The grocery industry is already focusing on how best to balance physical retail space against online retailing, but Amazon’s Whole Foods buy is a significant vote of confidence in bricks and mortar, Kalvoda says.
“It does validate that there is a need for a physical presence,” he says, noting that Amazon ended its Amazon Fresh home delivery of groceries in New Jersey shortly after completing the Whole Foods acquisition.
“It will definitely cause Walmart and others to really up their game in the grocery space world,” he says. “For consumers overall, it will be a positive impact, but from a retail center owner’s perspective, it’s whether or not your center is anchored by a Walmart or Whole Foods, where you’ll see the impact.”
For the Whole Foods-anchored centers, combining online ordering and store pickup could be a positive, because it will drive traffic to those stores, Kalvoda says, but he points out that if home delivery gets reintroduced, that could hurt the store volume.
“There will be a shakeout as to which grocers survive and get that right balance between online and physical presence,” he says. “The positive thing is the fact that Amazon is entering the physical world of grocery retailing as well as scaling back on some of the online, it does validate the need for a neighborhood center and grocery occupancy in those centers. In the long run, neighborhood centers should still be a good real estate investment.”