Grocery store wars have some retreating

Real Estate Spotlight

After less than two years, Sendik’s closed its West Milwaukee grocery store on Miller Park Way in April.

Mandel Group Inc. is walking away from its plans for a grocery store to anchor its food-centric project on the east side of West Allis.

Rather than including a 23,000- to 40,000-square-foot grocery store as originally proposed, The Market at Six Points project will have an additional 55 apartments, said John Stibal, director of development for the City of West Allis.

After less than two years, Sendik’s closed its West Milwaukee grocery store on Miller Park Way in April.

The $60 million Market at Six Points project has been in the works since Milwaukee-based Mandel was selected in February 2016 by city officials as the winning bid in a request for proposal to redevelop the city’s Six Points neighborhood.

Stibal said while he would like to see a grocery store at the site, he understands why it likely will not happen.

“The grocery store market is so competitive,” Stibal said. “The restaurants and food court area will still be there (in the Six Points development). And the additional apartments will add $5 million in value to the property.”

The retail industry has taken a hit in recent years as buyers have adjusted their shopping habits, and grocery stores have not been immune.

In Milwaukee, where new competitors have entered the market to challenge mainstays such as Pick ’n Save and Piggly Wiggly, supermarket profit margins are thin.

Sendik’s closed its grocery store in West Milwaukee on April 22, less than two years after opening it.

“Despite a lot of hard work, ongoing investments and the existence of the many intangibles that brought us to this location originally, we simply aren’t seeing the customer traffic and results to warrant continued operation,” Sendik’s co-owner Ted Balistreri said.

In October, Sendik’s closed its Brookfield location at 13950 W. North Ave., saying the company would focus its attention on other growth opportunities.

Tom Treder, principal at Founders 3 Real Estate Services LLC, said Sendik’s is still a successful company, but with the ongoing grocery store wars, companies need to be more selective about their locations.

Mandel Group was originally attracted to the West Allis site because of the renowned West Allis Farmers Market. Ideally, the developer would still like to sign local restaurant owners who fit with the neighborhood it’s creating, Stibal said.

In September, Mandel Group was talking to developers and operators of brewpubs and owners of small but well-regarded restaurants in the area.

At that time, Mandel Group told BizTimes there were letters of intent with two local operators and it was in negotiations with a grocery store tenant that would have anchored the development with an international market.

Mandel officials recently declined to comment on the project until plans are more concrete.

In addition to the food components, Aurora Health Care Inc. is building a $9 million, 30,000-squre-foot clinic at the corner of West Greenfield Avenue and South 66th Street.

Construction has also begun on 177 apartments, which are being built in two C-shaped buildings surrounding a courtyard at South 66th Street and West National Avenue, Stibal said.

Competition in the grocery industry in the Milwaukee market has been intense for several years, with several new stores opening. Meijer entered Wisconsin in June 2015 and now has eight stores in the Milwaukee area. Costco and Whole Foods also have been expanding their footprints in the area, and Fresh Thyme Farmers Market has entered the mix with stores in downtown Milwaukee, Greenfield, Brookfield, Kenosha and Menomonee Falls.

Target and Walmart now sell groceries in their stores and Aldi is also expanding in the Milwaukee market, with stores planned in Oak Creek and Glendale.

“Aldi has been extremely active and doing a lot of remodeling, as well,” Treder said.

Aldi’s recent partnership with Kohl’s Corp., which will add the discount grocery store chain in select Kohl’s stores that have been “right-sized,” will also give Aldi access to a new customer base, Treder said.

The increased competition has resulted in some store closures. From May through July 2017, six Pick ’n Save stores closed due to low sales, affecting 448 employees, and in March 2018, the Cudahy store was closed; it employed 75 people.

At the same time, Pick ’n Save parent The Kroger Co. has been investing in it’s high-performing stores across the Milwaukee market.

“It’s all about location and demographics,” Treder said. “The grocery stores that are well-positioned, are easily accessible and have a good amount of parking will be successful. Consumers want conveniences, good products and a well-run operation.”

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