For decades, the formula for developing successful new retail centers in Richmond was as clear as day: Land a Ukrop’s supermarket as the anchor tenant and fill in around it.
Given the chain’s no-alcohol policy, you usually got a wine store, and you could count on tossing in a pharmacy and maybe a few restaurants.
But that formula got more complicated in recent years, first when sales started to slow at Ukrop’s and then in 2009, when the Richmond-based grocer was sold to the parent company of Martin’s.
“Everybody wanted to be in a Ukrop’s shopping center, because Ukrop’s was the institution in Richmond,” said Peter Bunin, a broker with S.L. Nusbaum who helped develop some of the Ukrop’s shopping centers in Richmond and who leases space in four of the Martin’s centers.
Bunin said that for decades the 72-year-old brand made for an easy sell to prospective tenants but that the Ukrop’s centers eventually lost a bit of their allure. And then the economy slowed, making it harder to lease spaces everywhere.
A dozen brokers who talked with BizSense said that although Martin’s is still a big draw as an anchor tenant, outlying retail spaces in Martin’s centers are harder to lease to locally based businesses than when the stores carried the Ukrop’s banner.
That’s partly because there is simply more competition for grocery customers in Richmond, including Wal-Mart and Food Lion and more recent entrants such as Whole Foods and Trader Joe’s. And, of course, the economy is still hurting.
But brokers said Martin’s underestimated the loyalties of Richmonders and that their sales are lower than expected. And local retail tenants are more hesitant — perhaps just for emotional reasons, brokers say — to sign leases in centers anchored by Martin’s.
James Ashby, a broker with Cushman Wakefield | Thalhimer, said that overall there has not been a huge change in the kind of tenants attracted to Martin’s-anchored centers, but he noted that Richmonders have been slow to warm to the newcomer.
“Any time you make a big change, especially when they are taking over from a company like Ukrop’s, there will be some degree of that,” he said. “But overall there hasn’t been a big drop-off in foot traffic that I’ve seen in Martin’s centers.”
Connie Nielsen, also a Thalhimer broker, said that foot traffic in some Martin’s shopping centers dropped during the Ukrop’s days.
“Before Ukrop’s sold, they had seen a drop in quality and market share but had held onto their loyal fan base by being the hometown favorite,” Nielsen said. “Martin’s does not have that luxury.”
“The drop in patronage has [negatively] affected some merchants … that co-tenant with Martin’s,” she said. But “Martin’s is still a strong anchor, and as long as the property is well positioned and the center has other strong co-tenancy, they are still a desirable anchor.”
Luke Puccinelli, who works for Regency Centers and leases space near the Martin’s at the Village and at Gayton Crossing, said that local retailers are still wary of Martin’s shopping centers but that national retailers and restaurateurs see the grocer as a good anchor because its parent company is financially strong.
“They are too big a company and too experienced a company [to fail.] From the sales I’ve seen and the conversations I’ve had with their team last year and into this year, they’re moving in the right direction,” Puccinelli said.
As for Richmonders’ early reluctance to embrace the grocer, both as an anchor and a part of the community, it was a matter of how deeply entrenched Ukrop’s was in the Richmond culture.
“I think any other store would’ve had just a much trouble, whether it was Harris Teeter or Kroger or Food Lion,” Puccinelli said. “And a lot of other operators, I’m not sure they would have done as well as Ahold,” the parent company to Martin’s.
For Puccinelli, there is at least one big change that weighs in Martin’s favor: Unlike Ukrop’s, they are open on Sundays.
“In local name recognition, Ukrop’s was the better anchor tenant, but on Sunday there was almost no traffic,” he said. “Now retailers are saying, ‘Hey, Sunday is a full day of business.’ They are seeing traffic they never saw before.”