As Omaha's urban boom continues, downtown area is ripe for more grocery offerings

Barbara Soderlin/Omaha World-Herald - Brian Kamp loves his new home in The Breakers in downtown Omaha, where he and his fiancé have rented an apartment since March.

The redeveloped historic building, one of many new residential projects downtown in recent years, has riverfront views and a rooftop pool, and it’s just a mile to Kamp’s workplace, National Indemnity, an insurance company on 13th and Douglas Streets.

There’s a drawback, though, Kamp says: the distance he has to go to get to a grocery store. To do his weekly shopping, he drives to Hy-Vee on Center Street, almost 5 miles away, or crosses into Iowa to shop at a closer Hy-Vee in Council Bluffs, although, he says, “I really like to keep my money on this side of the river.”

Kamp might soon have more options, with some brokers and supermarket location experts saying Omaha is ripe for more grocery development downtown.

If true, it would make Kamp’s downtown experience complete. He occasionally picks up a few items at Cubby’s, a gas station and convenience store at 13th and Jackson Streets in the Old Market that also has a produce section, meat counter and as wide a selection of dry goods as fits in the corner of its 8,700-square-foot shop. But it’s not a place to do all your grocery shopping, Kamp says, and he can’t count on it having every ingredient should he discover he’s out of something in the middle of making a meal.

Other downtown dwellers drive to the several grocery stores along Saddle Creek Road, about 4 miles from downtown, including Baker’s, Walmart and Family Fare.

But the options for brick-and-mortar grocery shopping downtown are now limited to Cubby’s since Patrick’s Market near 14th and Howard Streets closed last week after 10 years in business. Its owner blamed online grocery ordering and delivery services in part for a lack of business.

Meanwhile, plans to open a year-round public food market on 10th Street just south of downtown have fizzled, organizers told The World-Herald earlier this month.

For people who live downtown, “They’d really like to have more choices,” said apartment developer Todd Heistand, whose NuStyle Development was behind The Breakers, near Fourth and Leavenworth Streets, and many other major downtown renovation projects, such as The Wire, The Highline and the Old Market Lofts.

The residential population in the census tract that most overlaps with downtown grew by a third, to nearly 4,000, between 2000 and 2010, according to David Drozd, research coordinator at the Center for Public Affairs Research at the University of Nebraska at Omaha.

Since then hundreds more residential units have opened up.

Commercial real estate firm Colliers International estimates that the population within 1 mile of downtown grew 28 percent from 2010 to 2017, to 11,802 people, and is expected to grow an additional 4 percent by 2022.

So the lack of a sizable grocery store is not stopping people from moving downtown, Heistand said. Many of his buildings’ residents grew up in, or raised a family in, suburban Omaha, still own a car and can put up with driving for groceries.

Still, a successful grocery store would be a sign of a stable and thriving downtown, said commercial real estate broker Trenton Magid, executive vice president at NAI NP Dodge Commercial Real Estate Services.

“When we see a full-service grocery store downtown, we’ll know we’ve really hit a mark,” he said.

More cities are getting downtown grocery stores, as urban populations grow and supermarket chains experiment with new store formats. Iowa-based supermarket operator Hy-Vee in February opened a 36,000-square-foot store in downtown Des Moines, heavy on prepared and ready-to-eat foods and built in a hip design with millennials in mind. (There’s a smoothie island and a bar where you can get your beer growler filled.)

In 2016, Hy-Vee Chief Executive Randy Edeker told The World-Herald that the grocer has explored building a smaller-format store in downtown Omaha similar to its Des Moines project. At the time, he said site-selection efforts hadn’t panned out but Hy-Vee was still interested. Hy-Vee declined to comment for this story.

Broker Barry Zoob, who represents the Patrick’s location for Colliers International, where he is senior vice president, reported a “tremendous” amount of interest in recent days for the Patrick’s spot, at 1416 Howard St. Zoob envisions a store with a mix of groceries and prepared foods.

“We’re talking to grocers right now,” he said. Does that include Hy-Vee? “Let’s just say they know about it,” he said.

He added that a name new to Omaha might also be interested.

But the Patrick’s site, at just 8,700 square feet — about a tenth the size of a surburban Hy-Vee store — still isn’t as big as what some would like to see.

Meanwhile, the developers for the now-vacant former Civic Auditorium site, Tetrad Property Group, have said they envision a grocery store in that planned mixed-use development. That site is the size of four city blocks and is close to Interstate highway access.

Existing grocery operators were skeptical that a larger competitor would make it, or even that any other grocery store could be successful.

“Patrick’s went out of business because there wasn’t enough business for them,” said Mike Schwarz, owner and operator of Wohlner’s Neighborhood Grocery & Deli, which has seen its sales growing at Midtown Crossing at 33rd and Dodge Streets. “I just don’t think there’s a great enough concentration for a full-service grocery store down there, personally.”

Cubby’s President De Lone Wilson said his Old Market store is tops in the Cubby’s chain for sales not including gasoline, and sales continue to grow. He’s lowered prices, expanded the produce section and added an outdoor patio to gain more traction with downtown residents.

“There’s a lot of room for us to grow,” he said. “Now, is there room for somebody to come and put in a full-service grocery store? I don’t know.”

Some industry experts do think there’s room, or soon will be.

“I think your downtown is on the cusp of supporting a full-line grocery store,” said retail location expert Jeff Green of Phoenix-based Jeff Green Partners, which has done work in Nebraska.

Given the limited population, it would have to be smaller than a suburban store — something like the downtown Des Moines Hy-Vee, he said.

And it would have to serve not only downtown residents but also draw in the significant daytime population of downtown office and service workers.

That’s because the cost equation is different for a downtown store, said Chris Randall, retail location consultant and a partner in L.E.K. Consulting’s Boston office.

Supermarkets already run on tight profit margins, and with rent and labor costs higher in urban areas, a grocery store would have to do significantly more sales per square foot to be profitable, he said.

That’s one reason the new urban markets are designed to sell more prepared and take-out foods than a typical supermarket. These items are more profitable, and they serve a customer who’s grabbing lunch during work or picking up something to eat for dinner that same night — not doing a week’s worth of stock-up shopping.

“Most people don’t know what they’re going to have for dinner tonight,” said Santa Monica, California-based grocery consultant Phil Lempert, who has worked with Nebraska food businesses.

Lempert said a downtown store should serve customers all through the day — the before-work breakfast, the coffee break, the lunch on-the-go, the prepared dinner and late-night drinks or snacks. It can reach people through social media — say, tweeting about the daily lunch special.

And it can offer convenient services that help overcome a downtown parking crunch, like how Des Moines’ Hy-Vee has lockers where people in a hurry can pick up the grocery order they placed online.

“You’ve got to really understand your consumer base,” he said.