Here’s How ‘Golden Tenants’ Can Help Revive Ailing Shopping Centers

Here’s How ‘Golden Tenants’ Can Help Revive Ailing Shopping Centers

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A retail property in Kirkland, Washington, was struggling until a popular national grocer arrived on the scene, a move that industry professionals say could be repeated across the United States.

That property, called The Village at Totem Lake and owned by CenterCal Properties of El Segundo, California, underwent a successful turnaround after bringing Whole Foods Market on board and it’s now thriving, according to Doug Munson, head of advisory services for data firm RetailStat. The property is now a mixed-use site, with residential units also added.

“It’s right off [Interstate] 405, (in) a high-profile location, but it was … a dying center,” Munson said. “I think that there was maybe a Marshalls left. But it was just going through a long tired demise. We were able to convince Whole Foods to go to the location. It was a perfect fill-the-void for Whole Foods. But it completely transformed the entire shopping center.”

Amazon-owned Whole Foods is considered a vibrant retailer, a so-called golden tenant, that can help revitalize ailing shopping centers or malls and boost already-successful retail locations.

For retail landlords and brokers, golden tenants are chains that have a devoted following among shoppers, generating foot traffic that tends to attract other occupants to join them and lease space at those retail properties. An Apple store would be another golden tenant for a retail property, according to some industry analysts.

A panel on “golden tenants” held this past week at the ICSC New York conference included, left to right: Molly Morgan, executive vice president of retail leasing at JLL; Doug Munson, head of advisory services for RetailStat; and Barrie Scardina, president of Americas retail services for Cushman and Wakefield. (Linda Moss/CoStar)

Munson and several real estate brokers discussed how top retailers such as Apple and Whole Foods can play a pivotal role in increasing foot traffic and revitalizing shopping centers at the recent ICSC New York annual dealmaking conference in New York City.

Of course, every mall and shopping center is different and faces different challenges. Bringing in a new tenant, even a very successful one, may not be enough to put every troubled retail center back on course. And even the biggest and most profitable retail chains can make a bad choice about a location and end up shutting stores.

Even so, one conclusion from the panel was that once ironclad co-tenancy rules — about what kinds of tenants should be adjacent to or near supermarkets, for example — are changing as landlords strive to create new kinds of tenant mixes intended to attract shoppers and drive business.

At one time, an apparel or beauty shop — or a gym — was considered an unlikely neighbor or strange bedfellow to a grocery store. The conventional wisdom was that someone who came to a fitness center, presumably watching their weight, would not stop to buy food on the way out of the gym, prompting some grocery stores to exclude fitness centers under their co-tenancy rules.

But fitness-oriented consumers may be more likely to stop to food shop so they could cook at home to eat healthy, and grocery stores could “provide everything that they would want after a workout” by offering well-positioned protein bars and smoothies, Brandon Isner, head of retail research for the Americas at CBRE, told CoStar News.

At The Shoppes at DePiero Farm in Montvale, New Jersey, the regional grocer Wegmans is on a tenant roster that includes Orangetheory Fitness, Ulta Beauty and upscale athleisure seller Lululemon, according to Barrie Scardina, president of Americas retail services at Cushman & Wakefield.

Lululemon has traditionally been a national mall staple, not a tenant that’s usually part of the mix at a neighborhood or lifestyle center. However, gyms draw repeat customers for such retail venues, and cosmetics retailers have been racking up strong performances.

Regarding the revived Kirkland shopping center with its Whole Foods, Munson said, “The great thing about a grocer, most of you know, once you can secure that grocer, [you can] build around it.”

Once Whole Foods committed to the Kirkland location, “Trader Joe’s, which was in a separate parcel … moved over into the center as well,” according to Munson. “All the co-tenancy just lined up,” he said.

CenterCal didn’t immediately respond to an email from CoStar News seeking comment.

Connecticut’s Stamford Town Center has diversified its tenant mix by adding a pickleball facility. (CoStar)

Scardina also cited a Connecticut mall’s attempt to reinvigorate itself with a new category of potential golden tenants that offer what she calls “competitive socialization,” such as the wildly popular sport pickleball. The property she referenced is Stamford Town Center.

“There is so much residential growth in that area,” she said. “That mall was built a million years ago in the ’80s, really for people in Westchester to drive into Connecticut. So the parking’s underground and it’s really sort of closed off from the community. But there’s such a big opportunity. They’ve introduced some grocery. They’re putting in pickleball there and really starting to become … that community center.”

And now Pickleball America has leased space once occupied by a Saks Off 5th store.

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