Indianapolis is experiencing explosive growth in the mid- and big-box grocery store sector. Capitalizing on the consumer trend of active and healthy lifestyles, the metro area has attracted new concepts to the market. Fresh Thyme Farmers Markets will soon join the already healthy and organic offerings of Whole Foods, The Fresh Market and Earth Fare.
Although these brands have a smaller footprint than traditional grocers, these specialty gourmet grocers account for seven new stores consuming more than 160,000 square feet of retail space throughout Indianapolis and the suburban markets.
This growth in the organic and health food concepts complements the well-care businesses that expanded their presence in the Indianapolis area last year, including Vision Works, Med Express, ATI Physical Therapy and Accelerated Physical Therapy.
Consumer demand for convenient access to personal well-care services, such as medical spas, massage therapy, cosmetic dentistry and personal fitness is on the rise. These types of businesses account for a significant amount of absorption within several neighborhood shopping centers throughout the market.
In that vein, consumers also are choosing healthier dining options such as grab-and-go prepared foods at their local grocer rather than hitting the fast food drive-thru or dining at a restaurant. This preference supports the need for grocers to supply healthy and wholesome foods.
Complacency: Not An Option
In addition to new grocery concepts, Indianapolis also is experiencing expansion and repositioning in the market among traditional grocers. From a brick-and-mortar perspective, grocers are updating their stores to reflect today’s trends and meet customer expectations while, at the same time, maximizing sales.
Although Marsh is closing five stores in the metro area, it has almost completed construction of a new 40,000-square-foot, urban-style store downtown that will anchor The Axis @ Block 400. This $80 million mixed-use development will include 487 apartments and 8,000 square feet of street-level retail.
This location, as well as Marsh the Marketplace at Lockerbie, will serve the growing downtown population, including the increasing number of students who previously commuted to Indiana University Purdue University Indianapolis (IUPUI) and now have chosen to live downtown in order to experience the full live-work-play environment.
This supports a growing trend across the United States, as millennials deeply influence buying patterns. In addition to the urban lifestyle they desire, millennials want an enriched shopping experience.
Population growth is definitely a contributing factor to grocers’ growth or expansion efforts in Indianapolis. An increasing demand for multifamily housing and the surging student population is leading to record occupancy and student housing growth.
The multifamily vacancy rate is at its lowest level in decades. The vacancy rate for Class A apartments downtown is 5.3 percent. Strong demand continues to drive new development as an increasing number of residents are flocking to the urban core.
More than 30 projects with nearly 4,000 residential units are underway and will be completed by 2017, according to Indianapolis Downtown Inc., a not-for-profit organization that develops, manages and markets downtown Indianapolis.
Just north of downtown, Whole Foods, the largest natural and organic specialty grocer in the country, will build a new 35,000-square-foot grocery store as part of Browning Investments’ mixed-use development that will include 88 upscale apartments in the trendy Broad Ripple area.
Suburban Development
The suburbs are experiencing growth as well. Giant Eagle Inc., a supermarket chain based in Pittsburgh, has announced plans to build a 120,000-square-foot Market District at The Bridges in Carmel, and continues to eye the market for new store opportunities.
The Fresh Market recently opened a new store in Fishers, while Earth Fare opened stores in Carmel and Noblesville and has plans for a store in Greenwood. Fresh Thyme, a new player with connections to Meijer, plans to take existing space in the Greenwood Shopping Center and is considering additional options in the market. Lucky’s Market, a natural organic foods grocer, also is looking to make inroads in the Indianapolis market.
Additionally, Meijer is building a 192,940-square-foot store at Marketplace at Anson on land it has owned since 2008 in Whitestown. Walmart has opened five Neighborhood Markets, including new stores in Fishers and in Indianapolis, a new store at Michigan Road and Kessler Boulevard and a redevelopment at 10th Street and I-465.
All of this activity is strengthening the Indianapolis area retail market, fueling new development of small shops and pad site sales surrounding the grocery-anchored sites.
Vacancy continues to trend downward, rents keep trending up and anchored space is at a premium in high-demand trade areas. The overall retail vacancy rate continues to track at its lowest level since the onset of the Great Recession and currently stands at 7.2 percent for all retail types.
Competition in the grocery segment will continue as traditional grocers grapple with this influx of new players looking to seize a slice of the grocery pie. Few industries stand to benefit from consumers’ growing health-conscious needs more than grocery stores.
As a result, growth from new retail concepts should far outpace the amount of space that will be given back this year. Smaller-format grocery expansion will continue. However, there is nothing small about the economic impact of this segment.
So, who will win the food fight in Indy? Clearly, we the consumers will be the winners as the options to purchase fresh, organic and gourmet foods expand in our neighborhoods.
— By Jacqueline Haynes, CCIM, Senior Vice President, Cassidy Turley. This article originally appeared in the March 2014 issue of Heartland Real Estate Business magazine.