Demand Rises for Convenient, Quality and Affordable Retail in Cleveland
By Catherine Lueckel and Allison Giomuso, Matthews Real Estate Investment Services
In nearly every major metro in the Midwest, the most active retailers expanding, leasing or developing involve grocers, discounters and drive-thru tenants. Most of the activity in the Midwest is reflective of the broader trend in shifting consumer demands, away from wants and more toward needs and services.
It’s no surprise that discount retailers rose in popularity among shoppers during economic uncertainty, as they offer products for a fraction of the price. This trend is very apparent in the Midwest, with consumers focusing on value through the wake of the economic recovery.
While discount retailers offer the best value in their products, they equally search for the best value in their real estate. Their expansion goals align closely with their financial goals; therefore, they target the Midwest, where deals are not overvalued and produce a higher rate of return. The Midwest boasts cheaper real estate compared with other regions, and more robust growth due to the affordable cost of living and lower costs of doing business.
Discount-oriented retailers dominated Ohio’s leasing activity, specifically in Cleveland, where they accounted for the most move-ins and top leases in 2020. The top leases signed in the state include Big Lots, Burkes Outlet and Kohl’s.
The large discount store, Krazy Bins, has been a success with Cleveland consumers, offering various everyday essentials from home décor to clothing at substantial price cuts. The average value of a retail item is $59 and is priced no less than 50 percent off the original retail value. Owner Noah Leavitt came across the store’s concept while visiting Florida and decided to bring it back to the Midwest. Leavitt buys truckloads of overstocked and returned merchandise from national retailers and then places various items in bins around the facility. Every item is priced the same and adjusts based on the day of the week. For example, on Friday, every bin item is $10, Saturday they are $5 and so on. By Tuesday, the items are 50 cents.
Krazy Bins is currently leasing a 22,500-square-foot space in Mentor, a 47,155-square-foot space in Parma and a recently opened 32,000-square-foot space in Akron to accommodate a large number of items and consumers entering its doors each day. Customers travel from over 20 miles away to snag these “Krazy” deals, with some shoppers lining up outside the store as early as 2 a.m.
With our help, Krazy Bins continues to expand and search for vacant big box stores across Northeast Ohio, as the necessity for affordable everyday products is unmistakable.
Drive-thrus helped quick-service restaurants and drugstores continue to serve customers through the pandemic while other retailers were temporarily forced to close their doors. Because of this, drive-thrus grew in demand last year among investors, developers and franchisers.
Restaurant or fast-food chains that originally functioned without a drive-thru are taking action by implementing or seeking locations with drive-thru capabilities to stay in the game.
Some Cleveland businesses are having to get creative to combat the increased demand for drive-thru accessible locations. Corner Cup Coffeehouse, a local woman-owned coffee shop, is renovating an endcap within a shopping center to offer drive-thru service to customers. The coffee shop previously held a storefront in the Cleveland area but was forced out during the pandemic after the building owner terminated its lease to re-lease to a larger tenant.
Not wanting to lose the shop or minimize quick-service options, the owner hired us to find an alternate location that allowed for the continuation of her business model. We were able to find a location that fit all the owner’s criteria.
Restaurants aren’t the only industry confined to drive-thrus for sales. Several companies realize the importance of a drive-thru, including drugstores, banks, convenience stores and grocery stores. In fact, drugstores were the most active in leasing drive-thrus in the Midwest, according to CoStar. Tom Custer, vice president of architectural firm FRNCH Nelson, predicts grocery stores to implement high-volume drive-thru pickup areas on the sides of grocery stores as online order trends continue to accelerate.
As businesses and the general population seek more convenience and affordability following a year of uncertainty and economic hardship, the Midwest will continue to see growth and investment activity. The Cleveland retail and leasing market is set to fully recover in mid-2022, with various industries thriving throughout the major market.
Catherine Lueckel and Allison Giomuso are both associate vice presidents of retail leasing with Matthews Real Estate Investment Services. This article originally appeared in the August 2021 issue of Heartland Real Estate Business magazine.