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A&P Bankruptcy Opens a New Era in Retail Real Estate

New Opportunities Ahead for Shopping Centers in Northeast U.S.

We recently saw the end of a long chapter in American retailing when the parent of the iconic A&P brand filed for Chapter 11. This is the second time in five years that the quaintly named Great Atlantic & Pacific Tea Company (now a division of Montvale-Para Holdings) has entered bankruptcy proceedings and it looks as though this is the end of the line. Once the Wal-Mart of its day, A&P created the supermarket concept in 1936, bringing a diverse inventory at low prices to a mass market and becoming the world’s largest retailer. There are many reasons for its demise, including a string of strategic blunders, and we can count on the media to deliver a full autopsy soon. But from my perspective, the primary failure of the 156-year old retailer was remaining static while the world was changing. A&P tried to retain its classic retailing model in the midst of a dynamic and robust competitive landscape of supercenters, dollar stores, convenience stores, and discounters. At the high-end, Whole Foods, Fresh Direct, and new concepts like Amazon Fresh and Blue Apron were staking their claims. In the middle, retailers such as ShopRite and Stop & Shop reinvented and modernized their stores. In an industry with razor-thin margins, the competitive squeeze was too much.

Whats Next for Grocery-Anchored Shopping Centers Post-A&P?

In a recent article, USA Today said “A&P’s biggest asset may be its real estate,” which includes A&P, Pathmark, Waldbaums, SuperFresh, Food Emporium, A&P Liquors, and Best Cellars stores. This puts the spotlight on the shopping centers of the Northeast region of the country, where most of these stores are located and where our portfolio is concentrated. It appears that Stop & Shop, Acme and Key Foods have struck deals on 120 of the locations. A&P has said it will close 25 stores, which leaves 176 on the block. Lots of retail real estate trends are in the making.

As leading retail leasing advisors, our Levin team sees the A&P bankruptcy as signaling a new paradigm. We’ve found that retaining competitive advantage following a change in a retail anchor tenant requires both strategic rethinking and capital infusion. Retenanting and repositioning is a constant factor in effective asset management. It’s part of the game plan for success in our dynamic retail real estate industry. Sometimes a bankruptcy is the driver, sometimes other factors are at play. Whatever the impetus, these are situations that present opportunities for reinvention and growth. And in a market that’s got plenty of post-recession momentum going, there’s cause for optimism in the face of anchor changes. It’s much too early to get specific about the effects of A&P’s passing, but the takeaway here is that one of the few things we can count on is change.