After taking the suburbs by storm all bulked up with megastores, many of the nation's top retailers have tweaked their real-estate strategies as they move to flex their muscles with the city crowd. "Small" is one of their tactics.
Giant chains, such as Whole Foods Market (WFM), Wal-Mart Stores (WMT) and Target (TGT) are making a push into the more densely populated urban markets as they look to enhance their revenue and tap into a new customer base in underserved communities amid both changing lifestyles and a changing retail real-estate landscape.
It has meant reworking their store models and merchandising with smaller formats and trimmed-down assortments, to better accommodate the needs of city dwellers.
The effort comes at a time when the older baby boomers and the Generation Y crowd are moving into more urbanized areas because they want more convenience with easy access to transit, shopping and restaurants, says Maureen McAvey, senior resident fellow for retail at the Urban Land Institute.
"There's so much more apartment and condo living in these densifying areas that from the retailer's standpoint, they can significantly increase their trade areas by moving to where the people are," she said.
By staking a claim in more tightly populated locales, retailers have the potential to draw bigger volumes.
"Typically, because urban locations tend to be surrounded by a much more densely populated consumer base, and thus, drive more customer visits than a suburban location, the corresponding sales per location also tend to skew much higher," said Lew Kornberg, retail tenant rep lead at commercial real-estate firm Jones Lang LaSalle (JLL). "It wouldn't be at all unusual for an urban location to average two to three times the sales volume of a traditional, suburban location."
There's a "day and night difference" between pricing on suburban retail space and high-end city centers, says Kris Cooper, managing director for capital markets at Jones Lang, as institutional investors are risk-averse and there's "tremendous demand for city centers and little product available."
Retailers see opportunity to fill a void in downtown urban areas. Take Whole Foods, which is opening its first small-format store location in Detroit's Midtown district in June. Whole Foods management began in 2009 to scope out communities that didn't have access to many grocers that specialize in fresh, healthy food.
New Food Frontiers
Whole Foods pegged Detroit, a city fallen on hard times, as a place where it could help, says Walter Robb, the grocer's co-CEO.
source: http://news.investors.com/business-inside-real-estate/013113-642711-whole-foods-market-wal-mart-stores-target-get-city-lift.htm
