Dominick's Shutdown Boosts Sub. Vacancy

CHICAGO—The massive shutdown of the Dominick’s grocery store chain was a big shock to the metropolitan area’s retail sector. Dominick’s vacated about 2.8-million-square-feet of retail space, but according to Newmark Grubb Knight Frank, the suburban retail market still managed about 774,000-square-feet of positive net absorption in 2013. However, although other grocery chains–including Caputo’s, Jewel, Mariano’s and Whole Foods– will soon fill some of the vacancies, the shutdown did trigger an increase of 50 bps in the vacancy rate to 8.9%, the highest quarterly increase since the economic crash of 2008.

“The short-term focus will be on filling or repurposing the glut of empty big-box spaces left behind by Dominick’s,” says James Schutter, a senior managing director with NGKF Retail. “The amount of time it takes to find new tenants for the recently vacated space could be a significant factor in how the market performs in 2014. Neighboring stores in community centers where Dominick’s was an anchor tenant may see fewer sales as a result of the reduced traffic to the shopping center, which could lead to longer-term occupancy losses.”