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Where to Build C-Stores in 2020
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Where to Build C-Stores in 2020

Consumer, demographic and even pandemic trends alter the top spots for convenience-retail growth today,building with bricks

CHICAGO — When Family Express Corp. mulls store-building strategies, the team leans on a slightly unorthodox but highly efficient vetting process.

“We count rooftops,” says Gus Olympidis, CEO and founder of the Valparaiso, Ind.-based chain of 73 stores. “Our business model is very neighborhood intensive: We want to be where the families are to deliver a friendly retail experience, with one prime customer being the mom, the homemaker.”

To one successful chain, that’s a time-honored metric for thriving. But the residential-centric expansion strategy is taking on new urgency for some chains since early spring, when the COVID-19 pandemic led to a paradigm shift.

Once drawn to building stores in the urban jungle–or in areas where entertainment, shopping malls, technology hubs and distribution centers were located–the shift makes buying or building in these environs no longer a lock for success.

“The burning question is, ‘When will shopping and entertainment come back?’ We know residential density won’t go away; the demand never left,” says Travis Heiser, president of IMST, a Houston-based real-estate consulting firm. “This all adds up to greater home consumption, and c-stores are well-positioned to serve these changed consumer routines.”

Building on the trend, a scenario exists where people once bent on relocating might stand pat due to economic duress, while on the flipside, millennials and Gen Zers could be fleeing urban living for less expensive suburban housing.

Chains ahead of the site-selection curve recognize this. “What’s now on my radar that wasn’t in 2019 is the emphasis on smaller, satellite metro areas. Think Grand Rapids, Mich., where people can draw a circle in any direction and find attractive daytrip or weekend destinations,” Heiser says.

New Frontiers

Another factor driving site selection is capitalizing on last-mile fulfillment opportunities in some shape or form, particularly as retailers see a growing number of their customers adopting online grocery ordering habits.

This could spell construction of cold-storage facilities to meet the demand, as broader adoption of grocery delivery is bound to create demand for 75 million to 100 million square feet of new cold storage nationwide, according to commercial real estate brokerage CBRE.

Will retailers follow the last-mile fulfillment movement?

“This pandemic has moved everything up maybe five years, where people who weren’t ordering online have had no choice other than to use the internet,” said Tony Pricco, president of Chicago-based warehouse developer Bridge Development Partners. “Now they’re seeing how easy it is, and they’ll continue to use it.”

Based on new and existing factors, chains find the need to select a lane in the aftermath of COVID-19: Defer new-store projects to 2021 and beyond or continue full speed ahead.

“It’s a recalibration where, if a company had been looking at 10 sites to build, then maybe now they change those plans,” says Heiser of IMST. “Some might say, ‘I think we’ll stay out of this project and pursue something that might be more advantageous.'”

“We temporarily deferred some spending related to new store construction as a result of COVID-19,” Casey’s General Stores, Ankeny, Iowa, CEO Darren Rebelez said during an earnings call in June. “We believe we are well positioned to continue our growth through a combination of reaccelerating organic development and a disciplined acquisition strategy.”

Capital Gains

How chains proceed hinges on how much cash they’ve burned through as collateral impacts of the pandemic, says Joe Bona, president of Bona Design Lab Inc., New York City, which offers retail design consultation services to retail sectors including the convenience channel.

“They’ve put the brakes on projects, but are keeping plans alive with the hope of ramping up next year,” says Bona, detailing his experiences. “There’s not a so-called light switch where it just flips on and new c-store construction resumes at once. It occurs in a more incremental timeline.”

Bona says chains are not only suffering from cash burn, but also finding it hard to get on the meeting agendas of local/county governments for permitting approvals to greenlight projects. “Some are seeing pushback obtaining approvals for that 5,000-square-foot store that might have too much seating capacity post-COVID-19,” he says.

“The pandemic has not changed our new development plans but has accelerated the plans.”

Greg Parker, founder and CEO of Parker’s, a chain of 66 c-stores based in Savannah, Ga., reinforces the theory, adding that certain municipalities “haven’t been available to review plans or inspections. It’s very much county- and municipality-specific, and that has resulted in projects delayed.” Parker builds, on average, a dozen new stores a year, with three opening this spring and another under construction.

See Also

Parker believes convenience retailing will “once again demonstrate a resilience” in the shadow of COVID-19. “I was doing state of the industry in 2008-09 [during the financial market crisis] and it was reported that c-stores were viewed as a recession-resistant industry. Perhaps the same outcome occurs after the 2020 pandemic.”

Winners and Losers

Heiser of IMST sees convenience chains capitalizing on several trends in the aftermath of the pandemic’s spring peak–one is where once-grandiose, oversized commercial developments such as shopping malls or entertainment centers see footprints scaled back–an outgrowth of the pandemic.

“This could put chains in a position to acquire the corner they didn’t think they’d have an opportunity to get but is now available as a sub-lease when the original project was reduced,” says Heiser.

With capital flowing freely, Olympidis of Family Express says the chain that operates in north central and northwest Indiana is moving ahead with projects with “all guns blazing. The pandemic has not changed our new development plans but has accelerated the plans.”

In what’s become a redefined marketplace, Olympidis, who’s in the process of adding six car washes to existing Family Express locations in 2020, believes “it’s myopic to perceive this [COVID-19 period] as just ‘new stores or new car washes being built,’ but a transformation. We’re positioning Family Express as the chain to visit if you don’t want to catch anything. It’s brought to the forefront a level of awareness with consumers. We can retool to meet their expectations.”

“There will be winners and losers, with the weaker companies starting to fall out of the marketplace, and multiples may come down,” says Parker. “The companies who have been thoughtful or prudent, with strong balance sheets and cash, I think they will be in the driver’s seat.”

When it comes to where to build new stores, Heiser of IMST sums it up this way: “The most important markets might be the ones you’re already in, rather than the ones you’re thinking about. The key is to build or buy innovative and leading-edge stores–new, big and bright while communicating clean and safe. It’s not always about scouting for the next great market but staying put,” he says.

Sources: 24/7 Wall St., National Realtors Association, U.S. Census Bureau, Forbes magazine, USA Today and Conde Nast Traveler

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