Amazon Fresh has inked a deal for its fourth Orange County location, and its largest local store to date.
Brokerage records indicate the tech-focused grocery store has signed a 50,000-square-foot lease at the Laguna Hills Plaza along Alicia Parkway, at a shopping center just south of the Santa Ana (5) Freeway. The spot was previously occupied by several retailers, including Dick’s Sporting Goods and Big Lots.
The company is far from the only grocer making notable local real estate moves: grocery stores are behind four of the six largest retail leases in OC during the first four months of 2022, according to data from real estate market tracker CoStar Group Inc. and other sources.
The quartet of grocer deals, which include Amazon Fresh’s new Laguna Hills store, a new H Mart lease in Westminster and two new locations for Buena Park-based Asian grocer 99 Ranch Market, including its first-ever location in South County, total nearly 206,000 square feet.
Trend Continues
Grocery stores have been on a growth spurt that kicked into overdrive during the pandemic, as consumers focused on essential purchases, sending U.S. grocery sales to new highs.
Modern grocery concepts and specialty food retailers that cater to certain demographics—such as Amazon Fresh, Bristol Farms and H Mart—have been among the top stores expanding locally in the past year, with these retailers growing their OC footprint in new markets outside of the usual hot spots in Central Orange County, brokers note.
“What once seemed to be niche is now the norm,” Mike Tsaparian, an executive vice president at Lee & Associates’ Commerce office, told the Business Journal.
Specialty grocers such as 99 Ranch and H Mart “fit what the market is demanding, and are able to outprice competitors like Vons or Kroger.”
What’s more, many of these retailers are often taking spots not previously used by competitors.
“Grocery stores used to just move from one spot to another, but now they’re taking infill locations from old department stores,” Tsaparian said.
That’s good news for retail landlords and investors looking to revamp shopping centers that have lost other anchor tenants before and during the pandemic.
Specialty Growth
In the largest of the four reported local grocer leases signed year-to-date, H Mart inked a 69,445-square-foot lease for its sixth Orange County location. The Korean-American supermarket chain will take over a former Vons store in a Westminster’s Pavilion Place shopping center, a spot along Beach Boulevard that is owned by Kimco Realty.
It’s not the first time of late H Mart announced plans to take over a local space from another grocer.
The company, which operates three local stores, in Buena Park, Garden Grove and Irvine, plans to open additional Irvine locations at two now-shuttered Albertsons supermarkets, in two Irvine Co. properties. Those locations were each expected to open late last year, but have been delayed.
The Westminster store, meanwhile, is now moving ahead.
H Mart recently kicked off the planning process to overhaul the Vons store into the newest outpost for the grocer, which is expected to open next year.
“The Westminster demographic is perfect, and the shopping center is very well run,” Tsaparian said. “It was a win-win” for H Mart and Kimco Realty, which have partnered together previously on deals in Northern California, according to Tsaparian, who represented H Mart in the lease.
Newmark represented Kimco in the lease, marketing records indicate.
Fresh Concept
Amazon Fresh’s new Laguna Niguel store is expected to be the company’s second location in South Orange County; the company last month opened a spot at the redeveloped Gateway in Mission Viejo shopping center, marking the e-commerce giant’s third store in Orange County.
The Gateway center, just off the 5 freeway along Crown Valley Road, is owned by Newport Beach’s Burnham Ward Properties, the well-known retail developer behind Costa Mesa’s SOCO and OC Mix shopping center, among other area projects.
It paid a reported $16 million for the site in 2020—among the top South OC retail purchases that year—and subsequently undertook a major overhaul of the property.
There’s plenty of interest for certain types of big-box anchored retail centers, if the properties are modern and in good locations, Scott Burnham, one of the partners at Burnham Ward, told the Business Journal late last year when the Amazon lease was made.
Freeway Adjacent
Amazon opened its first local grocery concept in Irvine at the Market Place in October 2020, just a couple months after the first-ever Amazon Fresh opened in Woodland Hills. Like the new Mission Viejo and Laguna Hills locations, the Irvine Amazon Fresh is a stone’s throw from the 5 freeway.
Amazon Fresh opened the second OC outpost about a year ago in Fullerton, at 1100 S. Harbor Boulevard, a space previously used by the now-defunct Toys R Us.
Brokerage data indicates the Laguna Hills store will be the firm’s largest to date locally, with the company’s other three locations ranging in size from 30,000 to 40,000 square feet.
Amazon Fresh brings its vast online offerings to physical stores, combining Prime members’ digital activity with a physical grocery location that touts competitive prices.
The 35,000-square-foot grocery store in Mission Viejo uses the company’s “Just Walk Out” technology in OC, in which Amazon uses cameras, weight gauges and scanners to monitor goods that are removed from shelves and put into shoppers’ carts, allowing members to skip checkout lines altogether and pay with the card connected to their account.
The e-commerce brand has also brought the “walk-out” technology to its sister franchise Whole Foods in recent store renovations and openings.
South OC Entry
In February and March, 99 Ranch signed two leases totaling 86,430 square feet in Tustin and Aliso Viejo, respectively.
The stores will be located in two retail properties operated by Irvine-based ValueRock Realty Partners.
In the larger of the two deals, 99 Ranch signed a 45,000-square-foot deal at Aliso Viejo Commons, a 14.5-acre shopping center near the intersection of Aliso Creek Road and the 73 toll road, with tenants including Michaels, Trader Joe’s, Taco Bell, and Walgreens. The grocer will take up a portion of a former Lowe’s Home Improvement store.
It’ll be 99 Ranch’s first spot in South OC.
ValueRock said late last month that 99 Ranch would also join the retail landlord’s Larwin Square Shopping Center at 500 E. 1st St. in Tustin. The grocer signed a 15-year lease for a 41,400-square-foot anchor space at the center just off Newport Avenue.
The Tustin market is expected to open early next year, “bringing the surrounding community its only premier Asian grocery store,” ValueRock said in a statement.
“99 Ranch sees Tustin as an untapped market,” Dennis Vaccaro, senior vice president of ValueRock Realty Partners, told the Business Journal.
Vaccaro added that 99 Ranch will perform better in the location than prior retailers, like Vons.
“They know how to service the mixed demographics and are more agile than the larger traditional grocery stores,” Vaccaro said.
The store will include frozen and fresh seafood with free services such as cleaning, frying and steaming. It will also have an in-house café with Asian specialty foods like barbeque pork buns and sushi, and a Taiwanese bakery.
The grocery chain was founded 40 years ago and will count five OC locations with the opening of the Aliso Viejo and Tustin stores; it currently counts three stores total in Irvine and Anaheim.
ValueRock said it has been a frequent partner to 99 Ranch, with a business relationship spanning more than 30 years.
Aldi, Bristol Farms
A few blocks from the forthcoming 99 Ranch location in Tustin, a new outpost for the discount shopping chain Aldi is going up. The spot, along Old Irvine Boulevard, was previously an Orchard Supply Hardware store.
Aldi currently has eight locations in OC, according to its website.
Carson-based Bristol Farms is another grocery store in growth mode locally. The luxury grocer opened its fourth location last month at the Irvine Spectrum Center, debuting its newest grocery concept, dubbed Newfound Market, which features an in-house dining hall alongside hyper-local product options.
The spot runs about 34,000 square feet and is the largest new lease for Irvine Co. at the Spectrum Center in a few years.
Grocers Booked and Busy
Retail centers of all kinds have seen grocery stores become the best-performing tenants during the pandemic, specifically grocery-anchored retail concepts as consumers focused on essential purchases.
Chicago-based JLL Inc. reported that U.S. grocery sales grew 9.4% in 2020 and reached $803 billion in 2021, up 16% from pre-pandemic levels.
Acquisition volume for grocery-anchored retail properties last year was over $13.3 billion, JLL notes, while leasing volume suggested most grocery companies are in growth mode.
Online grocery shopping hasn’t slowed, either. E-commerce grocery sales reached $122 billion in 2021 and is projected to triple by 2025, according to eMarketer.
