IRVINE, CA-There has been a lot of change in the demographic profile of Southern California communities, which has in turn impacted traditional grocery-anchored retail centers. Players such as Wal-Mart and Target are expanding their grocery offerings and locations. Club stores continue to compete effectively for consumer dollars relating to grocery products, meaning a decrease in trips to the nearby grocery store. Specialty grocers such as Sprouts, Whole Foods, and Trader Joe's now attract the higher-end, health-conscious customer.

So what's in store for certain Southern California grocery-anchored centers, many of which have seen the traditional grocery stores close their underperforming stores? Moreover, how do potential investors underwrite these centers and create value through retenanting the vacant grocery anchor?

Investors need to take a hard look at the area's local demographics. If an owner is left with a vacant grocery anchor it will be critical to target a grocery operator that is a good fit for the local customer base. For example, Albertsons had to close a number of low-performing stores—many of which were in heavy Asian and Hispanic populated areas—which the retailer was not equipped to market to. Kroger created Food 4 Less, a warehouse concept, in years past that experienced strong sales with the ethnic demographic, but has been increasingly impacted by the growth of the Hispanic markets such as El Super, Vallarta, and Northgate. Retailers who sell groceries are all vying for the same customers in any given area. If an owner can attract a grocery vendor who is a better fit for the area, they will most definitely win market share and add value to their asset.