Sweetbay closures present new challenges

The grocery industry is abuzz with the announcement made by Sweetbay, that it will shutter 33 underperforming Florida stores by the middle of February.

At least 1,000 employees will be out of work. Consumers who choose Sweetbay for an alternative to Publix, the dominant market leader, will have to look elsewhere.

But another big potential victim of the Sweetbay retreat: The just-starting-to-comeback Gulf Coast retail commercial real estate market, which will receive a new chunk of vacant properties. Indeed, 27 of the 33 stores marked for closure are on the Gulf Coast, from a 16,000-square-foot location in Tampa to a 50,964-square-foot store in Naples.

The 27 stores total more than 1 million square feet of space, according to a tally compiled by the Business Observer with data from real estate research firm CoStar. Most of those stores anchor shopping centers and strip malls, and the lack of customer traffic with an empty grocery store can have a negative domino effect on other businesses.

Still, Cynthia Shelton, with Colliers International commercial real estate, says the market downturn could be an advantage in this case because lower lease rates might attract more tenants. Shelton, who is based in Orlando but works on properties statewide, says that could mean chains like Whole Foods and Fresh Market might take a look at some Sweetbay locations. Other commercial real estate analysts say Wal-Mart and Publix are potential tenants, and possibly even the Dollar Tree, for smaller locations.

While the vacancies doubtlessly present a challenge, Shelton says the standard real estate rule — location — is the key factor in how the market will absorb the Sweetbay stores. “The good (locations) will be gobbled up,” Shelton tells Coffee Talk. “The bad ones won't.”

The bulk of the closures are in the Tampa Bay area, including 12 in Pinellas and Pasco counties and seven in Hillsborough. Three stores in Naples are on the list, in addition to four in the Sarasota-Bradenton region and one in Charlotte County.

Sweetbay, a subsidiary of Belgium-based Delhaize Group, will keep 72 Florida stores open, including several on the Gulf Coast. “While these decisions are difficult, especially given the impact on our associates, customers and communities, these actions will continue to enhance the performance of our overall store portfolio,” the company says in a statement.