What Happens if Fresh Market Goes Bankrupt?

Setting the Stage

I have no crystal ball to see the future and if a Fresh Market bankruptcy actually happens.  I have not examined their financials, received insider information, or anything of the sort.  This article, really a thought experiment, merely explores the possibility of Fresh Market closing its South FL stores and how that would impact the extremely competitive grocery market.

In April 2017, the privately-owned grocer announced five store closures in FL, IL, NJ, NY, and VA.  In mid-2018, it announced it would close 15 stores in nine states (none in FL) as part of its turnaround plan.  Fresh Market has 170 stores in 24 states, including 11 in Palm Beach and Broward Counties.  (I'm not including those stores in Dade County - 5 of them - because all of my data/research is focused on Palm Beach and Broward Counties.)

Data, Data, Data

Where does my data/research come from?  It comes from physically visiting all the shopping centers in Palm Beach and Broward Counties (roughly 1,000 properties; 96M sf) and counting vacancy, noting which big box retailers are still there, and which ones have moved out, condition of the property, etc.

Of those 1,000 shopping centers, grocery-anchored centers account for roughly 1/3 of the total (321), which is significant.  Publix is by far the dominant grocer in this market with half of the grocery market (161 stores).  No other grocer even comes close to this number of stores.

Fresh Market's Real Estate

It's always about the real estate.  While Fresh Market only has 11 stores in the two counties, it has some excellent real estate that many grocers would love to have.  Here's a look at their network of stores in these two counties.

311 E. Indiantown Rd., Jupiter

Let's take a zoomed-in look at one of Fresh Market's locations to get an idea of which grocers might be drooling at the mouth to see Fresh Market leave the center and create an opening for them. 

The Jupiter submarket has one of the highest occupancy rates in Palm Beach County (91.0%) and it will be getting even better as 70K sf of currently vacant space has "Coming Soon" signs in the windows.  If a grocer isn't already in Jupiter, they want to be.  And if a grocer is already in Jupiter, they might want another location--it's that good of a market.  

Question #1

The first question is: Which grocers are not in this submarket?  That's as simple as going down the list.  Let's start with the gorilla in the market--Publix.

Would Publix want to take this vacant box if Fresh Market left?  Most likely not.  They have two stores that are within a stone's throw of this property.

Would Winn-Dixie want this box?  No.  They just closed two stores in this submarket. 

Would Wal-Mart be interested in a Neighborhood Market concept at this location?  The nearest Neighborhood Market is down in West Palm Beach on Okeechobee Blvd., so there's certainly a hole in Jupiter.  However, there is a Super Walmart 2.5 miles to the east of this Fresh Market.  This could be a "maybe" in terms of deciding which grocer is missing, but it's probably a no when you consider question #2.

And so you continue down the list of missing grocers until you get a smaller list of potential backfill tenants. 

Question #2

The second question is: Which grocer is looking for a smaller-sized grocery box (this one is around 21,000 sf)?  This will cross off many of the grocers.  Among those remaining are: Aldi, Lucky's Market, and Trader Joe's.  

You'd also want to think about demographics and traffic counts and a whole host of other site selection criteria, not to mention the landlord's and grocer's expectations on rent and tenant improvement dollars, but let's keep it very simple--Who is missing from the market?  and, Who would want a smaller box?

Strong Contenders

If Fresh Market went bankrupt, and that's a big IF, my first three calls would be to Trader Joe's, Lucky's Market, and Aldi. Look at their network of stores and see the hole in Jupiter. 

More Great Real Estate

Fresh Market has some of the best real estate in South Florida and without a doubt, grocers would be very interested in taking their vacant boxes.   Here are the aerials of a couple other Fresh Market locations that would definitely be fought over: Wellington and Boca Raton.  This is the same story for the other locations not shown.