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Feature Article, August 2005
A “Fresh” Idea
Consumers in Florida are seeing fewer grocery choices, but more specialty centers.
Paul Ahmed
Not long ago, Florida consumers had a plethora of choices on every street corner when it came to buying groceries. This stemmed from the fact that land was cheap and plentiful in the early eighties while population growth soared. There was Publix, Winn-Dixie, Albertson's, Kash and Karry, Food Lion and a number of the local mom-and-pop stores to choose from. Believe it or not, at that time, most Floridians did not even know what a Wal-Mart was. Fast forward less than 10 years later and all the new grocery stores started out stripping growth, causing pressure on sales. And a certain department store from Arkansas was by now a household name.
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The Fresh Market in Aventura, Florida.
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Fast forward to today. Many grocers are consolidating, going out of business or withdrawing from the Florida market (i.e., Food Lion — statewide, Alberton's/Kash and Karry — many locations, Winn-Dixie — closing a number of Florida stores). The grocers' problems have created opportunities for other new “hip” grocers such as, The Fresh Market and Whole Foods. By now, most consumers are familiar with and many people have shopped in one of these. How have they been able to grow in such a competitive market that includes Publix and Wal-Mart? How are they finding sites with such lack of reasonably priced and well-located land? The answer lies in one of the most basic marketing concepts. Dr. Faricy, my marketing professor at The University of Florida, taught me a very important principle, create a product or service niche and stick with it. With The Fresh Market or Whole Foods, the niche is to serve high quality fresh groceries, offer more organic choices and offer the highest level of customer service at a reasonable price. These grocers have managed to open 21 stores in Florida, 10 in South Florida alone. That's more than Winn-Dixie, Albertson's and Food Lion combined in recent memory.
One such example of this success is on the Fresh Market location in Aventura, Florida, a higher income, primarily condominium-based community in Northeast Miami-Dade County. The owners bought the property several years ago. They tore down an existing three-story building with Washington Mutual on the ground floor and vacant on the other two floors. They demolished 26,000 square feet and rebuilt 75,000 square feet, including a new modern Washington Mutual branch on the out parcel and almost 20,000 square feet of class A office space. The developers, Triarch Investments, Mario Grosfeld and Jorge Linkewer, originally wanted to do a high-rise residential tower.
“We loved the site because it is main and main in Aventura,” says Grosfeld. “Although we originally wanted to do towers, in retrospect I am glad we went with a retail center. There are many high rises in Aventura, but only one Fresh Market center.”
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The 75,000-square-foot specialty retail center developed in Aventura, Florida. The developers, Triarch Investments, Mario Grosfeld and Jorge Linkewer, originally wanted to develop a high-rise residential tower on the site, but saw more opportunity for a specialty retail center.
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The other interesting aspect of this was the property sits along U.S. 1 at the entrance to Williams Island. The only way the transaction made sense financially was to redevelop at higher rents per foot and add class A high rent office space on the second floor. Certainly not your conventional shopping development of 4 or 5 years ago. This was such an early example of what is now a given, redevelopment of existing infill suburban locations in order to find suitable grocery store sites. Since that time, the idea of having a grocer on the first floor and multiple stories of residential and office is a given, and the vertical nature of these sites is reflected in the prices being paid. In fact, this trend is hitting other retailers with Home Depot, Target and others having multiple level stores now on a regular basis. It used to be second-story retail was a ghost town for centers.
What does this all mean for consumers? Probably less choice and higher prices. Landlords must charge higher rents along with higher associated CAM (increase in assessed values and taxes). In order to justify the higher operating costs, the grocers must obviously charge more for their groceries. Thus, as is usually the case, the consumers must pay.
Another upward pressure point on prices is fewer grocers to choose from. Mergers and consolidations have left fewer grocers. In Florida's case, there are primarily two, Publix and Wal-Mart. Unfortunately, this trend is evident in many other aspects of business so it is only likely to continue into the future. The good news for consumers is newer, more modern and cleaner stores and more convenient locations.
Paul Ahmed is a vice president with Collateral Mortgage Capital, LLC, based in the company's Ft. Lauderdale office.
©2005 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.
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