Desert Market Sites Attracted Buyers Before, Will Again

PHOENIX-Southwest Supermarkets, a locally based chain, has closed seven Desert Market stores in the state, adding to a burgeoning glut of big box retail space available in the market. Five are in the Valley and two in Tucson.

About 250 employees were laid off with Sunday’s shutdowns. The Phoenix-based chain purchased the stores just six months ago from Fleming Cos., a Texas-based food wholesaler that had been running the locations as ABCO Food stores. Fleming had 55 stores on the market and sold at least half to other grocery chains.

In a letter to employees, Southwest Supermarket’s CEO Tony Gioia said operations at the new stores were “very difficult” and further dinged by the slowing economy. Southwest was unable to secure additional funding or find a buyer for the stores.

“I very much regret that it is necessary to take this action,” Gioia wrote. “In view of the company’s financial condition, however, there simply is no choice.”

In the past year, a number of retailers have closed locations in the Valley–including Helig Meyers, Fry’s Food Stores, Home Place, AMC and Harkins movie theaters, Osco and Walgreens drug stores and Office Depot. Consequently, dozens of locations, ranging in size from 15,000 sf to 45,000 sf, are available to lease.

Several stores closed by Southwest Supermarkets are likely to be purchased by other grocery stores chains, given the competitive nature of the grocery store market in the Valley, says Judi Butterworth, a retail broker in the Phoenix office of CB Richard Ellis. The stores range from 30,000 sf to 45,000 sf. “Several people wanted those sites when Fleming put them up,” she tells GlobeSt.com. “I think several of those will be gobbled up.” The locations that have little nearby grocery competition are the ones that will be most likely to sell to another chain or independent, she says.

Southwest Supermarkets bought the seven stores in one transaction, which allowed the company to win out over bidders just looking to purchase individual sites. There’s no word from Southwest Supermarkets will hit the market.

Those sites unable to attract attention from other chains will more than likely be converted into non-retail uses, Butterworth says. Other like product has successfully been converted into call centers, charter schools and medical offices. The facilities generally have sufficient parking to handle just about any new configuration, she says. “It’s so early in the cycle, it’s a little difficult to tell what type of uses will and won’t work, and how it will affect the smaller shops,” she says. “Most of those are on high-traffic streets in densely packed areas. Some of the small shops may survive without having the grocery store anchor.