SUNDAY EDITION | Downtown Louisville grocery promised despite un - WDRB 41 Louisville News

SUNDAY EDITION | Downtown Louisville grocery promised despite uncertain market

Posted: Updated: Mar 01, 2015 06:00 AM
Rendering of proposed Omni Hotel in downtown Louisville Rendering of proposed Omni Hotel in downtown Louisville
Omni CFO Mike Garcia addressed the Metro Council in January Omni CFO Mike Garcia addressed the Metro Council in January
Marche Burette Deli at the Omni Amelia Island Plantation Resort in Florida (courtesy of Omni) Marche Burette Deli at the Omni Amelia Island Plantation Resort in Florida (courtesy of Omni)
LOUISVILLE, Ky. (WDRB) -- About a year ago, a consultant hired by the Louisville Downtown Partnership concluded that downtown Louisville could support a medium-size grocery in the central business district, a small food market in the Nulu area, or even both.

But one of the chains the consultant said could work downtown – Paul's Fruit Market -- isn't convinced.

“I know it's changing, but it seems like now (downtown) is more Monday-through-Friday busy and on the weekends, not so busy,” said Sally Thieneman, vice president of the family company that runs Paul's, which has four suburban stores.

While growing, downtown's residential population still is sparse compared with Louisville's inner neighborhoods and suburbs, and its residents lack the income and education levels that appeal to specialty chains like Whole Foods and The Fresh Market.

Past attempts at a downtown grocery, like the Market on Market store in the mid-2000s, have failed. And even bigger metro areas, like Cincinnati, haven't managed to attract a downtown grocery.

Yet Louisville Mayor Greg Fischer and Omni Hotels & Resorts insist that some type of grocery store will be part of the hotel-apartment development that Omni plans to build in the middle of downtown Louisville.

“We've committed with the city that we're going to find a way to get it done,” Omni Senior Vice President Mike Smith told the Metro Council on Jan. 12, while acknowledging “everybody is uncertain” how much business a grocery can do downtown.

SUNDAY EDITION Extra | Consultant first said Nulu would be best location for downtown grocery

Despite the assurances, there is no legal guarantee that the $289 million hotel-apartment development – about half of which will be funded with tax dollars – will include a grocery.

The agreement between Omni and Louisville Metro says if Omni's “best efforts” to secure a grocery store are still unsuccessful six months after the hotel opens – which should happen by early 2018 – Omni would then have the right to lease the space for “any lawful use.”

Omni has already begun advertising a 25,000-square-foot grocery space in the complex, although construction won't start until the fall. The space is about the size of a typical The Fresh Market store and a little bigger than a Trader Joe's – but only one-fourth the size of a typical new Kroger.

Jeff Mosley, Louisville Metro's primary negotiator of the Omni deal, said the downtown grocery is a certainty because Omni will fill the space with its own grocery if necessary.

Omni – which operates small groceries at some of its resort hotels – is “currently working on their own urban concept” while remaining open to interest from grocery operators, Mosley said in an email Thursday.

“(I)f the ‘ideal' vendor does not materialize to share or operate the grocery, they are going to do it themselves,” said Mosley, deputy chief of Louisville Forward, metro government's economic development department.

In responses to questions relayed through a spokeswoman, Omni chief financial officer Mike Garcia said the Dallas-based company has “a long history of owning, operating or managing retail concepts, including small grocers and general stores, at some of our resort properties.”

As an example, he pointed to a deli and wine shop called Marche Burette within Omni's Amelia Island Plantation Resort in northeast Florida. The resort, however, is more than 40 miles north of Jacksonville on the Atlantic Ocean – far from an urban setting.

“Although this (Louisville store) will be different, we are confident that they will deliver a wonderful product,” Mosley said.

Many cities want downtown grocery

For mid-size cities where most people depend on cars to get around, a downtown grocery is proof that the urban core is vibrant – a place where people live and hang out in addition to going to work.

“There is something about getting a grocery store that signals that your downtown has turned a corner -- it's a psychological victory,” said David Ginsburg, president and CEO of Downtown Cincinnati, Inc. His city is still trying to land a downtown grocery.

Nashville has two very small downtown groceries with prospects for a full-service store in or close to downtown, according to the Nashville Business Journal. 

In downtown Indianapolis, a local chain called Marsh opened a 43,000-square-foot store on the ground floor of a new, five-story apartment building last year, and a Whole Foods is slated to be part of a 28-story “luxury apartment tower” that broke ground this month.

Downtown Louisville advocates point to projects like the new 310 @ Nulu apartments at the Liberty Green development and the 7-story apartment building planned at Main and Clay streets as examples of downtown's continued residential growth. The Omni tower will also have 225 “luxury” apartments atop the hotel.

“We're having more and more people moving downtown – moving in apartments and condominiums – and they want a grocery store there,” Fischer told WDRB on Friday. “That will revitalize and continue to fuel the movement of residences downtown, which is important to have a healthy, active, 24-7 downtown.”

U.S. Census figures show that 40202 – the zip code encompassing Louisville's central business district – added housing units at a rate three times faster than Jefferson County as a whole from 2000 to the five-year period of 2009-2013.

The central business district had 3,332 housing units in 2009-2013, up 28 percent from 2000. Of those, 2,725 were occupied, a 20 percent jump since 2000.

Yet the median household income in 40202 is only $16,069, compared with $46,959 in Jefferson County as a whole.

In their regulatory filings, both Whole Foods and The Fresh Market list income and education levels – along with population density – as key factors in determining where to put a store.

“We have got to be able to show we are building a housing stock to attract young, educated workers who are going to make a good salary,” said Louisville commercial real estate broker Reed Weinberg, president of PRG Investments, who is not involved in the Omni project but hopes to see the grocery succeed.

Groceries get nearly 50 percent more spending from households with children than those without, according to a 2014 survey by the Food Marketing Institute, an industry research group. So, they want to be near families with kids.

But only 13 percent of the households in 40202 have children under 18, compared to 27 percent in Jefferson County as a whole. More than 70 percent of the Central Business District households are people living alone.

 “The reality is, most people who live downtown have a tendency to go out and eat out, and so you literally need twice the density (of residents) downtown that you would need in the suburbs in order to support a grocery store,” said Bill Weyland, an architect and developer who has built hundreds of downtown housing units in various buildings. “That's been part of the problem; we still don't have enough density.”

Another issue is that a downtown site usually does not have abundant surface parking. Nationally, 93 percent of grocery shoppers use a car to get to the store, according the Food Marketing Institute.

“The ease of getting to the store, the parking at the store -- those are all key factors,” said Bill Justin, president of W. L. Justin & Associates, LLC, a grocery consultant outside of Atlanta.

Patrons of the Louisville downtown grocery will be “provided” with parking in the PARC garage the city is building as part of the complex, Omni CFO Garcia told WDRB. But he would not say whether the parking would be free, explaining that the project is in the early stage “with many of these details still to be determined.”

Weyland and other industry experts said the downtown store will have to be publicly subsidized, at least at first.

Phil Scherer, a longtime commercial agent who lives downtown, said giving a grocer free space, even for the first five years, would be a good public investment because it would generate more residential building downtown.

“The city really has more to gain than any private developer has, and that is why it has not happened,” said Scherer, president of Commercial Kentucky Inc.

While tax dollars will pay about the half the cost of the Omni project, the deal does not include any direct subsidy to the grocery operator.

Omni has listed the 25,000-square-foot space for a rent of $12 per square foot annually. While there are not many comparable big retail spaces downtown, the asking price is significantly below the going rate of $20 or more for store space along Shelbyville Road in St. Matthews, where Trader Joe's and Whole Foods are located.

Another key for the grocery store, Omni executives said in January, is that it draw not just from downtown residents but from daytime workers and hotel guests. That means offering offering deli-style meals for lunch and prepared dinners to go.

Hungry hotel guests are often looking for something “a little bit lighter, less expensive (and) more casual” than a sit-down restaurant, Omni's Smith told the Metro Council in January.

Omni's grocery at the Florida beach resort looks a lot like a café. Pictures on Omni's website show a small space with meat and seafood counters, a large wine selection and eat-in tables.

“We think to be successful down here it will probably also have a deli component or some type of food service where you could each lunch in – as well as a grab ‘n go for both lunch and dinner – with the hope being that maybe some people that work downtown will stop at this store to pick up food to take home with them,” Smith said.

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