Safeway, Walgreens bulk up in islands

Safeway Inc. intends to build eight stores in Hawaii within the next three years, while Walgreens Inc. has as many as nine island projects in the works.

The developments are part of a larger trend of investments by self-financed national retail chains that are expected to change Hawaii’s retail landscape.

"In the next couple years, the most active shopping center developers in Hawaii will be retailers," said Mark Bratton, president of Bratton Realty Advisers Ltd. "When you go buy a gallon of milk, they’re going to put it into real estate."

Safeway is planning stores in Laulani Village in Ewa Beach; Kauai’s Hokulei Village in Lihue; the Big Island’s Lanihau Marketplace in Kailua-Kona; and Maka’ala Center in Hilo. Safeway had previously said it was redeveloping the former Schuman Carriage Motors Inc. automobile dealership site on Beretania Street and closing its old location across the street.

In addition, the Pleasanton, Calif.-based supermarket chain is reviewing three more potential shopping center development sites, including two on Maui and one on Oahu, ranging from 10 to 27 acres, according to Safeway’s broker, Wendell Brooks III. The chain has about 1,800 locations nationwide, including 19 stores in Hawaii.

The company recently acquired a long-term ground lease from the state Department of Hawaiian Home Lands to build a shopping center on about 24 acres in Hilo that will not be anchored by a Safeway store. That project, to be called Hualani Point, is expected to open in 2012.

Property Development Centers, Safeway’s wholly owned real estate development subsidiary, has contracts to purchase land for most of the new locations, according to Jon Anderson, Property Development’s vice president of leasing.

"Right now the strategy is just to build it and hold it," he said. "If there’s enough land we’ll build a shopping center – Safeway has been doing that for 20 years. For us, if we have a grocery store, it’s beneficial to have other goods and services as a convenience to serve the neighborhood."

Safeway is completing an overhaul of its stores nationwide and is repositioning itself as a more upscale "lifestyle" concept with diversified products including organic produce, sushi bars and a variety of prepared carry-out foods.

Meanwhile, Walgreens also plans a rapid expansion over the next two years, with as many as nine Hawaii projects in the pipeline, Robert Roscoe, Walgreens divisional vice president of asset development, said yesterday.

Aside from developing its Nuuanu Shopping Center site, the Deerfield, Ill.-based drugstore chain expects to develop a store in Kapolei, as well as locations in Lihue on Kauai and Hilo and Kona on the Big Island. It is also considering four additional locations in Honolulu, which Roscoe declined to disclose. Walgreens has 7,800 stores nationwide, including a dozen in Hawaii.

As part of its long-term investments in Hawaii, Walgreens intends to redevelop its flagship store and adjacent office building on Kapiolani Boulevard within the next few years, he added.

In addition to Safeway and Walgreens, other major chains that are scouring the islands for possible new locations include Costco Wholesale Corp., Target Corp., Foodland Super Market Ltd., Longs Drugs Stores and Lowe’s Cos., according to Bratton.

"We probably haven’t seen this (much new development) before because we’ve always been so underretailed. As shoppers we’re the starving children," said Tony Mizuno, Bank of Hawaii’s senior vice president for commercial real estate, who participated in a panel discussion yesterday at the International Council of Shopping Centers conference. "Retailers have their own money. In the olden days when you think about it, Safeway didn’t build their own shopping centers because they didn’t have the $50 million to spend on building. They would let somebody else do it. Now they have their own capital. They’re very well capitalized and they know what they want."