When a retail chain closes scores of stores across the United States, commercial real estate professionals at one time used to worry about filling that vacant space quickly. But now they say there’s no lack of expanding supermarket chains that could occupy the roughly five dozen Amazon Fresh grocery stores the e-commerce giant is closing, though there is a twist involved.
The U.S. grocery sector is fiercely competitive, with a wide array of chains — ranging from Aldi to Trader Joe’s to Kroger to H Mart — seeking to grow their brick-and-mortar space. Retail analysts and brokers say those companies are likely to be among the new tenants for at least some of the 57 Amazon Fresh stores slated to close, most of them on Monday.
Expanding grocers are hunting for locations in a market where the national vacancy rate is a tight 4.3%, according to CoStar data.
Seattle-based Amazon said last week it’s shutting down its branded brick-and-mortar forays into groceries, namely Amazon Fresh and 15 Amazon Go convenience marts, creating an opportunity for space seekers. The juggernaut vowed to instead double down on its online grocery delivery and to accelerate expansion of its Whole Foods Market chain, transforming an unspecified number of its Amazon Fresh stores to that banner. Amazon said overall it will roll out more than 100 Whole Foods stores over the next few years.
Here’s the twist: Supermarket chains have strict guidelines for the space they lease. The Fresh stores average 35,000 to 42,000 square feet, according to Bill Read, executive vice president for Retail Specialists. As is, that’s too big for some grocers and too small for others, according to brokers. Amazon will also have to negotiate with its landlords to exit its space and unexpired leases, buying out the remaining time on their deals, brokers said.
Amazon didn’t immediately respond to an email from CoStar News on Thursday seeking comment on its leases and talks with landlords.
While other grocery chains are the most likely suspects to take over Amazon Fresh space, several brokers said that off-price retailers may also be interested. That group would include Burlington Stores, T.J. Maxx and Marshalls.
‘Good locations in good markets’
Even so, grocery chains will be interested in the space once it’s up for grabs, according to brokers.
“Amazon Fresh are good locations in good markets with a higher-end income,” Read said in an email to CoStar News.
He’s been tracking Amazon Fresh stores, which debuted in 2020, for years now.
One potential new tenant for some of the stores is Germany-based Aldi. It is aggressively targeting the opening of another 180 stores in the United States by the end of the year, the second-most debuts in the country slated for 2026, according to Coresight Research. The chain, with its national headquarters in Batavia, Illinois, aims to have nearly 2,800 U.S. stores by the end of this year and 3,200 by the end of 2028.
Another German discount grocery chain, Lidl, has been rolling out United States stores far more sporadically, but it is expanding. With its national headquarters in Arlington, Virginia, Lidl is planning to open more stores on the East Coast this year. It will be debuting a location in Totowa, New Jersey, early this month and one in New York City on Feb. 25, according to a Lidl spokeswoman.
Grocery chains Trader Joe’s and Sprouts Farmers Market are also in expansion mode. For example, Sprouts has roughly 450 stores now with a goal of 1,400 stores throughout the United States.
Uncle Giuseppe’s Marketplace, a regional chain based in Melville, New York, is scouting for new store locations, and Amazon Fresh will be on its radar, according to Mike Nelson, president of the grocer. The chain — a purveyor of premium Italian foods, fresh produce, artisan meats and prepared foods — has 12 stores in New York and New Jersey.
“We’re actively looking for sites in our markets and adjacent markets,” he told CoStar News.
Finding the right fit
Uncle Giuseppe’s is working with broker Curtis Nassau of Ripco Real Estate to find locations. The chain has been opening two stores a year, with two planned for Long Island in 2026, Nelson said.
Nelson said Uncle Giuseppe’s stores are typically 50,000 to 60,000 square feet, with a sweet spot of 55,000 square feet. While most Amazon Fresh footprints are smaller than that, one of its largest locations — in Woodland Park, New Jersey — is roughly 60,000 square feet.
Potential tenants could take steps to tailor an Amazon Fresh space to their own needs, according to brokers. If they need a large site, they could try to add adjacent space — if available — to the Fresh location, Nassau told CoStar News. Or if a tenant wanted a smaller space, an Amazon Fresh store footprint could potentially be divvied up.
“Aldi would need to split most of the [Amazon Fresh] units, since their footprint is smaller and an Albertson’s would fit,” Read said.
But there are potential roadblocks to another grocery taking Amazon Fresh spaces.
On the one hand, supermarket chains looking to replace Amazon Fresh in theory can “take advantage of all the built-in infrastructure a grocery store needs like power, refrigeration and cooling that’s already in place,” according to Read.
Changes needed
On the other hand, changes would still have to be made for the new grocer tenant, he said. And former grocery stores aren’t necessarily replaced by another grocer as a tenant. Retail Specialists tracked former grocery stores in the Atlanta market and out of 22 locations only five wound up being leased by another grocer, Read said.
One reason is that chains such as Publix and Kroger will not let another grocery store open in their former locations, according to Read.
“They are not going to give up turf to their competitors, not as long as they’re still on the hook for the lease,” he said.
To top off the challenges, most of the markets where Amazon Fresh operated “already had substantial supermarket penetration,” and that chain “was not capable of converting these customers away from their current grocery stores,” Read added.
Reed also cautioned that “rents will not be inexpensive.”
Ethnic grocers such fast-growing H Mart, with its Asian fare, were also mentioned by brokers as candidates to take over vacant Amazon Fresh stores. However, H Mart is in the process of piloting going big. It will be opening its largest U.S. store — 100,000 square feet — at a shopping center in the northern Silicon Valley town of Fremont, California.