MELVILLE, NY — Grocers need to reexamine how their real estate will function in the post-pandemic world, writes Joe McKeska, a senior managing director at A&G Real Estate Partners, in an April 26 opinion piece for Progressive Grocer.
While many chains performed well over the past year, McKeska explains, consumer spending continues to swing back to dining out, in-person entertainment and travel. “That means many grocers will need to redouble their efforts to improve fundamental weaknesses that they were able to gloss over during the pandemic, such as subpar in-store experiences and inadequate omnichannel infrastructure,” he advises.
Optimizing real estate is an important way to free up the capital needed to fix those problems. In the column, McKeska offers four specific tips.
The first is to align your real estate and business plans. In managing real estate day-to-day, he notes, grocers can lose sight of the need for their portfolios to support their longer-term strategies. At many chains, for example, new approaches to the ecommerce supply chain are changing the parameters for store footprints and locations. “Your real estate plan needs to span multiple years and be fully in synch with all such strategic considerations,” McKeska writes.
The veteran grocery executive also advises grocers to plan early for lease expirations/extensions and store closures.
Extending a lease well before its expiration date is another way to create incremental value, McKeska advises. He cites a scenario in which the grocer plans to spend several million dollars on a renovation. In agreeing to extend the lease by 10 years, the grocery stands to substantially increase the resale value of the property, potentially into the seven figures. “This gives the landlord a good reason to provide rent concessions, contribute capital to the remodel and/or make improvements to the center,” McKeska writes.