What will Whole Foods do to area?
By Joseph S. Pete, NWI correspondent September 14, 2013
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SCHERERVILLE | Whole Foods Market has been disparaged for eating up whole paychecks, but its tony reputation could have a whole lot of impact on Northwest Indiana's image.
The upscale organic grocery chain plans to open a new store in Schererville's Shops on Main shopping center as soon as next year.
That investment says a lot about the region's economic vitality, since the Austin, Texas-based grocery chain has a reputation for wizardry with demographics and is known for planting its foodie flag in up-and-coming communities, said Micah Pollak, an assistant professor of economics at Indiana University Northwest.
"They're well-known for being able to predict areas that are likely to grow in the future," he said. "They have high standards and wouldn't come to the region if they weren't convinced it was going to grow. This is very good news."
Then there's what's been dubbed the "Whole Foods effect."
Studies have documented that Whole Foods stores boost nearby property values -- both commercial and residential -- by 10 to 20 percent, at least in the urban neighborhoods where it has often been a bellwether of gentrification.
Schererville is more of an established suburb, but experts said the store could lure more upscale retailers and restaurants to the area, and help make southern Lake County an even more desirable bedroom community for people commuting to Chicago.
A Whole Foods sends the signal that Northwest Indiana is a thriving, prosperous place with modern amenities, Pollak said. The grocery is known for selling its organic produce and antibiotic-free meat in more affluent neighborhoods, and has exacting site-selection standards, such as with how many college-educated residents live within a 20-minute drive.
The rise of the organic grocer marks a relatively new phenomenon in the retail world, said Theresa Williams, director of the Center for Education and Research in Retailing at the IU Kelley School of Business. Historically, most grocery stores are regional, and have grown into new markets by buying out other regional chains.
But Whole Foods has grown organically into a national chain just by the strength of its brand and its reputation for a wide selection of fresh organic food, Williams said.
"Property values absolutely increase, because Whole Foods brings in the same type of retailers," she said.
The presence of a Whole Foods tells other retailers there are enough affluent consumers nearby that the upscale grocer can make a go of selling arugula, grass-fed beef and synthetic growth hormone-free cheeses, said David Lasser, president of the real estate firm Commercial In-Sites in Merrillville.
Whole Foods also is known for doing its homework about markets, and picking good sites.
"There's the idea of 'it's good enough for me if it's good enough for McDonald's,' " Lasser said. "Or 'If it's good enough for Walgreen's, it's good enough for me.' These companies have enormous resources for analyzing markets, and other companies follow them."
Better restaurants, retail also sure to follow?
A Whole Foods is an anchor that has the potential to draw a lot of upscale customers to Shops on Main. The traffic it will generate should interest higher-end restaurants and shops in the remaining outlots at the $112 million shopping center, and the new Shoppes on the Boulevard development across the street, Lasser said.
An upscale grocery might pique the interest of high-end restaurant groups such as Lettuce Entertain You and Levy Restaurants that have rebuffed past courtship efforts by Northwest Indiana commercial real estate agents, Lasser said. They operate a variety of mostly finer restaurants that have locations in Chicago and its northern and western suburbs.
"This might be the type of development to draw them in," he said. "It's all about the demographics of the clientele that's driving by."
A Whole Foods Market, however, may not be the mark of distinction it used to be for a community. The chain is expanding from 340 stores to a target of 1,000 over the next decade. Whole Foods recently announced plans to move into Engelwood, one of Chicago's poorest neighborhoods, and opened a grocery this summer in Detroit, one of America's poorest cities.
High household incomes and other desirable demographics also are not the only things drawing Whole Foods to Northwest Indiana. The town of Schererville is subsidizing the shopping center where the Whole Foods will be located.
"I don't think anything changes with the demographics considering that Whole Foods was subsidized heavily to come into the area," said Aaron McDermott, president of the real estate firm Latitude Commercial.
"The real test will be to see how successful they are once they open."
A traditional challenge to luring more upscale retailers to Northwest Indiana is that so many higher-end stores are already clustered a short drive away in Chicago and its south suburbs. Many companies refuse to open new locations within a certain radius of existing stores.
"The issue we have always had when trying to attract higher-end tenants to the area is to convince them that the typical radius restrictions for their customer they would look at in other markets, doesn't apply to this area," McDermott said.
"In my experience, Northwest Indiana customers of higher-end brands are willing to drive to seek out the products they like."
If more upscale stores cluster in the area, it could have a positive effect on residential property values, but a Whole Foods alone likely would not have as dramatic an impact in Schererville as the grocery has had in rebounding urban neighborhoods, said Peter Novak, chief executive officer of the Greater Northwest Indiana Association of Realtors. The Whole Foods just affirms it's a great community, he said.
People move to communities that are close to their jobs, are safe and have good schools for their children, not because of grocery stores, said Dennis Rittenmeyer, executive director of One Region, a local initiative to improve Northwest Indiana's quality of life. But an upscale grocer like Whole Foods is an amenity that can make a community more desirable.
"If they're on the fence one way or the other, it's 'and there's a Whole Foods here,'" he said.
The planned Whole Foods Market may just be the first in Northwest Indiana, if the store in Schererville succeeds, Lasser said. The chain has 18 Chicago-area stores, but likely will see the Indianapolis Boulevard location as a test pilot for the Northwest Indiana market.
"There was one Target, now there's six Targets," Lasser said. "There was one Home Depot, now there are four Home Depots. There was one Lowe's and now there are three. They're all under the Chicago advertising umbrella. Once you have the regional management in place, it's easy to gear up and add a couple stores."