Supermarkets in New York are booming thanks to the extinction of big boxes

Lois Weiss

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By means of Lois Weiss

Supermarkets are seeing green in the urban areas of the city. The craters left by now-defunct big box stores, victims of the pandemic, are proving to be fruitful opportunities for well-positioned perishables suppliers.

“COVID has helped create a dynamic that has made this a golden era,” Peter Ripka of Ripco Real Estate said of the grocery boom.

The years of the pandemic not only taught New Yorkers what that four-eyed appliance in their kitchen was for, it also taught them to use it with enthusiasm. Nowadays, the average Joe can soufflé and fricassée like Escoffier. Thanks to more flexible business hours, they also shop locally.

New residential towers along the Brooklyn and Queens waterfronts have created an explosion in demand for food. And while many have discovered that it’s worth the tip to have their rations delivered, e-commerce has helped rather than hurt.

“The current view emphasizes a mixed model, where e-commerce remains a key growth direction, but physical stores are key pillars of the supply chain,” real estate analyst Green Street reported in February.

One of the latest demonstrations of brick-and-mortar possibilities in the city comes from Whole Foods, which opened at the foot of Harry Macklowe’s 1 Wall St. in the Financial District on 42,000 square feet, and plans to open smaller, 7,000 to 7,000 square feet to open large stores. 150,000-square-foot Whole Foods Daily Shop outposts that can nestle into urban spaces, with the first, at 1175 Third Ave., opening later this year.

“It’s always difficult for growing supermarkets to find space in Manhattan,” said Jeffrey Roseman of Newmark, who leased the city’s first Whole Foods in Chelsea in 1999. “Rent is the key – they can’t pay a lot of rent.”

It is difficult to find 50,000 square meters that meets all the requirements and is affordable. “That’s why Whole Foods went to a smaller model.”

But others aren’t afraid to make it big. A CBRE group is marketing 42,009 square feet of bi-level retail at the base of Taconic’s new 330-unit apartment complex on West 42nd Street, across from the Port Authority.

“We have a handful of letters of intent from different supermarkets,” says Lon Rubackin of CBRE. “If you had asked a few years ago whether we would have a supermarket on site, I wouldn’t have believed it. They are all competing for the same spot, but there are so many homes now and the grocers all recognize (the demand).”

New developments everywhere are a fertile source of space, and local supermarket Brooklyn Fare will open its largest location this spring in a 25,000-square-foot store on two floors at the foot of One Manhattan Square at 227 Cherry St., said Alan Oppenheimer of Extel.

For a group of New Yorkers longing for quality, the opening of Wegmans in the Brooklyn Navy Yard was a cause for celebration. But you might have thought the Yankees won the World Series when the upstate New York chain opened a second location at Vornado’s 770 Broadway in Astor Place last October. Fans lined up around the block.

Now a third location is planned for the 51,000-square-foot cavern left by Bed Bath & Beyond at Glenwood Management’s 1932 Broadway, near Lincoln Center.

Other larger chains also making their way into the city include Germany-based Aldi. Since 1979, Aldi has owned the beloved Trader Joe’s brand, which has a hive of “crewmates” who replenish items and operate dozens of checkouts to move the highest number of visitors per square foot in the industry, according to Green Street and Placer.ai. It is now expanding with a new store in Harlem opening later this year at 123 W. 125th St.

Aldi competitor Lidl, another affordable German grocer, is also making inroads with several new locations in Staten Island, Harlem and Queens. It takes over the former Michaels at both the Bronx Terminal Market and Fresh Meadows. The chain leased a 51,000-square-foot former Key Foods in the Feil Organization’s Glen Oaks Shopping Center and has opened two others in Brooklyn in a rental project in Crown Heights and another on Fulton St.

In Park Slope, Lidl will replace a Key Foods where William Macklowe and GreenBarn are building a low-rise, two-building project at 120 Fifth Ave. Macklowe called it “a perfect fit” and “a great addition to the neighborhood.”

“If we open in Park Slope, it will be a game changer,” says Lidl’s Or Raitses. “We’re lowering grocery prices across New York City. It is very important to us as part of our mission.”

But Manhattan is also hungry for discounts. In Chelsea, Lidl will open in MAG Partners’ new apartment complex on the Penn South site at Eighth Avenue and West 26 Street – the former site of a Gristedes. “It is rare for a supermarket to sign a lease before a shovel has ever been put in the ground and this is a testament to the need for affordable supermarkets in the city,” said MaryAnne Gilmartin, the developer.

But New York’s most famous grocery king, John Catsimatidis of Red Apple and Gristedes, is not expanding. Its union stores are more expensive and recent thefts have pushed losses from 1.5% to 6%. “Does the city belong to criminals or to sane New Yorkers?” he asked.