Abandoned grocery stores bring their own set of challenges

Sitting at high-traffic intersections along some of the Upstate’s busiest roads, grocery stores and big box retailers are among of the community’s most visible assets — by design.

So when they close, those vacancies stand out like a sore thumb.

Several readers reached out to Upstate Lowdown looking for answers regarding the future of stores like the recently shuttered Bi-Lo on Fernwood Drive in Spartanburg, or properties like the old Ingles near the intersection of Asheville Highway and Pisgah Church Road that has been empty for years. Upstate Lowdown is a Herald-Journal and GoUpstate.com feature that allows readers to ask questions for the newspaper to answer.

But in this case, there are no easy answers. The stores' parent companies aren't talking, and commercial real estate agents will tell you that these are tough properties to sell.

The stores

Jenny Stevens, on the urging of her mother-in-law Jean Stevens, was among the readers who reached out looking for the scoop on the abandoned Bi-Lo at 140 Fernwood Drive.

As part of its ongoing restructuring, Southeastern Grocers — the parent company of Bi-Lo, Harvey’s and Winn-Dixie — announced in March it was closing 94 underperforming stores, with the Fernwood Drive location among those on the chopping block.

“My mother-in-law (Jean Dickinson) is elderly and she’s not all that mobile anymore,” Jenny Stevens said. “She lives right off Fernwood, and that Bi-Lo was her favorite store in the world.”

For Dickinson, the store provided just the right mix of access, affordability and selection, like an on-site pharmacy and baggers who were willing to help take her groceries to her car.

“I think that was the store of choice for everybody in and around the high school,” Jenny Stevens said. “And so when it closed and we didn’t get a whole lot of notice, I think that left a lot of people like Jean wondering where they were going to go.”

There are other nearby grocery stores, like Aldi, that could fit the bill, but Jenny Stevens said her mother-in-law has a hard enough time lining up a ride to the grocery store to fret about remembering to bring her own grocery bags.

Neither Southeastern Grocers nor the property’s current owner, Waterstone Southeast Portfolio, returned calls for comment in time for this article.

Jenny Stevens said she’d heard that Food Lion or a Trader Joe’s might be interested in the location. Food Lion’s corporate communications team declined to comment on that possibility, and Trader Joe’s Public Relations Director Kenya Friend-Daniel said no store in Spartanburg is in the works for the remainder of 2018.

“But we always have real estate teams out scouting and looking at locations,” Friend-Daniel said. “It’s possible somebody may have bumped into one of those teams in Spartanburg.”

Other stores readers asked about:

• The vacant Bi-Lo location at the Cypress Shopping Center in Boiling Springs. The store closed in June 2017 and is currently owned by WHLR Cypress of Virginia Beach, Va. Dave Kelly, the CEO of Wheeler Real Estate Investment Trust, told the Herald-Journal in July the company was waiting to lease to the right tenant.
• The Ingles at 2795 E. Main St., Spartanburg. The vacant property adjoins a newer Ingles location that remains busy.
• The Ingles near the intersection of Asheville Highway and Pisgah Church Road in Boiling Springs, which is directly across from North Spartanburg Fire District Station 1. It remains boarded up and features graffiti courtesy of local artists. A representative from Ingles' corporate office in Asheville did not respond to requests for comment through Friday afternoon.
• A third former Ingles location, near the intersection of Boiling Springs Road and 4th Street, which is currently owned by Spartanburg-based Highway 9 Storage LLC. Company representatives could not be reached by phone.

The challenge

Multiple Upstate commercial real estate pros weighed in on exactly why it’s hard for former grocery stores and big box retail outlets to find a second life.

“They’re just big is really what it comes back to,” said Ralph Settle, a brokerage associate with Collier’s International. “You’re talking in the neighborhood of 44,000 square feet of space there on Fernwood Drive, and what do you come up with to fill that?”

Settle said operations like a workout center — a Planet Fitness, for instance — could make sense for a former grocery store. Sitel also made the most of transforming an old grocery store into its custom call center on Springfield Road.

Part of the problem is cost, as companies have to weigh the pros of cons in redeveloping an older property versus building something new — even in the case of a new grocery store, Settle said.

“What companies wanted 15 or 20 years ago isn’t what they want today, so that’s why you see an Aldi or a Lidl come into the market and build new,” he said.

Ben Hines, president of Spencer/Hines Properties, said the fact that Bi-Lo closed on Fernwood means other grocers might think twice before leasing the property.

“If Bi-Lo had issues there, Harris Teeter or another competitor may wonder if they’ll face the same thing,” he said.

Hines said the contrarian take would be for a future tenant to consider their business model against Bi-Lo’s. But not every store closing, even those a company deems “underperforming,” is the same.

“In some cases you’ve got a store where it’s got everything in its favor,” said Hines, worked on the deal that brought Bi-Lo to Boiling Springs in the late 1980s. “Visibility, entrance and egress, a solid brand — but it’s not successful enough. If your store is in the bottom third of whatever metric the parent company is looking at, you could end up getting closed. So it’s not a foregone conclusion that site won’t work for somebody else.”

Alex Powell is the downtown leasing and development manager for Johnson Development, but in a previous life he worked for a private equity fund that oversaw everything from strip centers and enclosed malls to redeveloping 30-year-old properties.

Powell said the conventional wisdom in the commercial real estate industry can often be boiled down to assessing known-versus-hidden costs.

“When you take an old grocery store and work on backfilling it, you find stuff you never considered,” Powell said. “So costs rise from $30-$40 per square foot to north of $120, and all of a sudden you’re in trouble.”

In that scenario, building from scratch becomes the more attractive option. But Powell said he believes the old grocery stores scattered across Spartanburg Country could find second or third lives as niche markets.

“Think something with a smaller footprint that also has some kind of an entertainment option as well,” Powell said. “I’ve seen some great projects around metro Atlanta that took old grocery stores and combined them with bowling, laser tag and a restaurant. If you’re just competing on groceries alone, it’s tough. But if you can add some other kind of hook, (like) entertainment, then these places become extremely valuable.”