BUSINESS

Supermarkets not sold on downtown – yet

Bowdeya Tweh
btweh@enquirer.com
  • Kroger is among retailers that are mulling opening a grocery store in downtown Cincinnati.
  • Challenges including downtown’s population density to financing remain present in store development.
  • Residents remain committed to lobbying for new downtown store to support area’s growth.

Kroger says it could be interested in building a grocery store Downtown. A Downtown leader says discussions about a grocery are accelerating. And every year, more Downtown residents cite a grocery as their biggest business need.

So why doesn’t a store just move in to fill it?

An Enquirer review finds that significant holdups still exist, 40 years after the last Downtown grocery left.

Store operators find the population not dense enough to support a thriving operation. And the right location, operating model and financing continue to be elusive, interviews with real estate and grocery experts show.

Any grocer other than Kroger would also go head-to-head with the nation’s largest supermarket chain, which has several stores within a few miles of Downtown.

Downtown residents and workers thought a grocery store was finally in the making as part of a planned apartment-and-retail project to replace the old Pogue’s garage at Fourth and Race streets. But Mayor John Cranley said recently a grocery store is no longer part of those plans, although city leaders are still interested in the idea.

That hasn’t stopped residents and neighborhood advocates from making a pitch.

“Do we want Downtown to be a place where people want to live, or do we want to act like Downtown is not a real neighborhood?” said Travis Estell, 26, an Over-the-Rhine resident.

David Ginsburg, president and chief executive of Downtown Cincinnati Inc., said interest is growing: “When you finally get a grocery store in your downtown, it’s a psychological symbol that your downtown has made it. It means you’re on the road to being a full-service downtown.”

Here are the issues:

The right population density is a requirement

The population in the central business district, Over-the-Rhine and Pendleton has nearly doubled to 13,521 in the past decade, according to DCI. And demand for new condos is outstripping supply.

Still, Cincinnati real estate developers say store operators aren’t convinced the population density justifies development. Grocers typically define their core customers as people located within a few miles of the store.

Retailers can’t afford to open a store and wait a few years for business to get better.

“You’re not there yet, and frankly it’s not that hard to get to a good grocer,” said David Birdsall, head of Total Retail Solutions for Sycamore Township-based real estate company Phillips Edison & Co.

“Retail itself is brutal to begin with. That business (grocery stores) is especially brutal. It’s very, very much about volume.”

Six Kroger stores in Over-the-Rhine, Walnut Hills, Corryville, Bellevue, Newport and Covington are 3 miles or less from Fourth and Race streets. Other retailers are at Findlay Market in Over-the-Rhine. Walgreens and CVS stores Downtown also capture local dollars.

The right location to develop the store

Hitting on the best spot to develop a store is crucial, based on mountains of data on customer shopping habits and real estate options.

Retailers have to figure out logistics, parking needs, in-store product mix and possible complementary services, said Michael Paglia, a Boston-based director of retail insights for Kantar Retail.

A grocery store at Fourth and Race wouldn’t have been centrally located Downtown. Real estate sources have speculated that stores would be more interested in being near Central Parkway to draw people from OTR as well as Downtown.

One site that could be attractive is near Kroger’s headquarters at Central Parkway and Walnut Street. A Rookwood Properties affiliate owns the land that’s now a surface parking lot at the intersection’s southeast corner.

“We are exploring apartments, some retail and a parking garage,” said Jeremy Kanter, district property manager at Sycamore Township-based Rookwood. “We are aware that Kroger has been looking Downtown, but it is too soon to know if they would have any interest in our site.”

Developer Arn Bortz is among the people calling for a new store to be centrally located Downtown. Bortz, partner at Mount Adams-based Towne Properties, said he’d like to see a store near Seventh and Vine streets, near where Towne has land interests.

The right store concept for urban setting

Grocers around the country are studying different store models that could work in urban settings. The trick is discovering what works best.

Wal-Mart, Target, Whole Foods and Trader Joe’s are among stores that have rolled out different models of stores targeting customers who live in urban areas.

Paglia said the number of smaller format stores – about 20,000 square feet or less – is expected to outpace the number of mid-size or supercenter stores being developed nationwide.

Kroger stores typically feature a more “suburban” shopping experience with single-level stores near major thoroughfares and abundant surface parking, Bortz said.

Paglia said Kroger “came of age” when big-box retailing gained prominence and has been slow to adopt different store models. It would take nearly nine OTR Kroger stores to fill the Newport Pavilion location, which turns five this year.

“You come in once a week, fill up (a cart), pile everything in a car and you’re good for a week,” he said. “In an urban setting, the shopper has a different mindset. It’s a big departure from what they’re comfortable with.”

Supermarket operators of downtown venues also rely on shoppers to make frequent visits. Instead of collecting $100 from one visit, stores could see more long-term growth with people making 10 visits and spending $11 to $12 each time.

And Paglia said there are more examples of stores that are creating spaces for meetings or programming events at the store.

“A smart retailer is going to position themselves not just where shoppers can go and buy things,” Paglia said. “Even if I don’t buy anything, it’s a fun place to go. It’s an emotional experience to check things out.”

The right financing package

Store projects in urban communities often require a combination of incentives to reduce risk.

But putting deals together can be complex and potentially contentious, as evidenced by the $97 million Fourth and Race project, which was supposed to include luxury apartments, new parking and a grocery store.

The project called for a $12 million forgivable loan from the city of Cincinnati and $5 million in equity from a New Markets Tax Credit. Cranley balked at the dollar amount promised under the Mallory administration, and Cincinnati community development entities missed out on receiving tax credits through the program this year.

Project developer Indianapolis-based Flaherty & Collins declined comment for this story. In its home market, two Flaherty developments downtown are getting a 43,000-square-foot Marsh supermarket and a 40,000-square-foot Whole Foods market.

Dashed hopes with Fourth and Race project

Estell, the OTR resident, said many people are angry about changes to the Fourth and Race project announced about 18 months ago.

The new store could have helped support small retail shops, he said.

“We want young professionals to come Downtown. If we’re going to start getting families to stay, I just think having something like that is really important,” said MaryKate Moran, a 30-year-old Clifton resident who has previously worked Downtown. “It’s one of the main things that’s missing.”

Kathy Cox, a senior who lives in Pleasant Ridge, says a new store would help her make the decision to downsize and move closer to the urban core. Cox, who says it’s difficult for her to walk sometimes, said the store would give access to a wider range of food options than what’s already available.

“If I moved Downtown, I would want to be able to take a streetcar and grocery shop like I’ve done in cities where I’ve visited,” Cox said.

“Everyone would love the grocery store but the grocers have to operate profitably,” Bortz said.

Kroger’s founder Barney Kroger opened his first grocery store in 1883 in Downtown Cincinnati along a route that’s now Fort Washington Way. Its Downtown store on Race Street closed 40 years ago.

Kroger spokesman Keith Dailey said if the grocer were to open a Downtown store, it would have to be the right fit for the community and company.

“We remain interested in a new Downtown store if it can be economically viable,” Dailey said.

On the outskirts of downtown Columbus, a more than 66,000-square-foot Kroger has a wine bar and bistro in the front and programs different events at the venue daily, said Kantar Retail senior analyst Alida Destrempe. The store has a large deli for sandwiches, a salad bar, sushi and pizza. There’s also a self-serve area for drinks and to get other prepared foods.

The Over-the-Rhine store, opened in 1961, has made marked improvements in the past decade, said Julie Niesen Gosdin, who lives in the neighborhood.

When she moved there several years ago, the store had scant produce offerings and dedicated much more space to prepared or convenience foods.

Now, the store – responding to changes in the neighborhood – has more organic products, a gluten-free section and an expanded produce selection.

Kroger spokeswoman Rachael Betzler said the store manager has stocked shelves with more organic items based on customer requests.

A few months ago, Kroger funded the installation of new fixtures inside the store.

The company doesn’t have immediate plans for additional store remodeling work. ■

Near Downtown

Here’s a list of Kroger stores that are about 3 miles or less from where the proposed Fourth and Race store would have been in downtown Cincinnati:

• 1420 Vine St., Over-the-Rhine

• 53 Donnermeyer Drive, Bellevue

• 954 E. McMillan St., Walnut Hills

• 1 W. Corry St., Corryville

• 130 Pavilion Parkway, Newport*

• 1525 Madison Ave., Covington

* Kroger Marketplace

Stores just outside that range:

• 222 Piedmont Ave., Corryville

• 3609 Warsaw Ave., East Price Hill