Retailers like Lidl, Sephora, and T.J. Maxx are ramping up their competitiveness across New Jersey by staying flexible on key real estate decisions, according to Danielle Brunelli, president and principal of R.J. Brunelli & Co., a retail real estate brokerage serving both landlords and tenants, including the likes of Dollar Tree and Massage Envy.
“Initially, Lidl was intent on owning its own real estate and sticking to its prototypical store size and this is part of what slowed the German grocer’s expansion in New Jersey and elsewhere,” Brunelli said during the recent New Jersey Commercial Real Estate Forecast Conference. “However, Lidl has loosened its real estate requirements and is growing faster as a result, both by selectively building new stores and filling vacancies at former Pathmark and A&P locations.”
The remarks were part of a panel discussion, which noted that well-located grocery-anchored centers still perform well.
“Plenty of grocers are still expanding, including ShopRite, Whole Foods Market, Lidl, and Aldi,” Brunelli said. “Generally speaking, grocery-anchored properties are among the safest bets for investors.”
But for grocers, finding sites in New Jersey’s tight real estate market can be a challenge. Lidl, for one, has shown a willingness to move into properties that formerly had longstanding vacancies, such as Lawrence (Township) Shopping Center on Route 1, Brunelli noted. Securing such anchors can bolster landlords’ leasing efforts. “That center recently signed, not just Lidl, but also LA Fitness, Dollar Tree, and AutoZone,” she said. “It’s just one example of how a flexible grocer like Lidl can turn a shopping center around.”
Other chains would do well to consider whether greater flexibility—on owned-versus-leased real estate, prototype sizes, lease language, and other key decisions—could benefit their expansion plans, Brunelli said. “There are only so many great sites out there. The tenants that are willing to stay flexible are the ones we’re seeing make deals happen.”
Sephora’s record-setting expansion, she added, hinged on its decision to move out of malls and into higher-end strip centers. “Today, we’re accustomed to seeing Sephora, Sally Beauty, and ULTA Beauty locate in these properties, but that wasn’t always the case,” Brunelli said. “It’s also important to remember that these tenants are often willing to downsize quite a bit to secure sites with the maximum potential for traffic and sales.”
The extraordinary success of TJX Cos. Inc.—operator of TJ Maxx, Marshalls, HomeGoods and other concepts—also owes in large measure to flexibility, Brunelli noted. “TJX continues to grow and put pressure on other retailers by doing a great job giving people the merchandise and experience they want,” she said. “TJX has had the flexibility to figure out what actually works in our economy.”