Experts: Endangered downtown Marsh locations attractive to competitors

Retail and real estate experts say downtown Indianapolis likely will attract other grocery chains if a pair of Marsh supermarkets in the city’s core close within the next two months.

On Monday, Marsh Supermarkets warned the state that unless the struggling company can find buyers or business partners, it will close 16 stores, including its two downtown locations, within 60 days.

The stores are located at 227 W. Michigan St. in Flaherty & Collins Properties’ Axis at Block 400 apartment development and at 320 N. New Jersey St. in Lockerbie Marketplace. That would leave the downtown's core without a grocery store as apartment developers prepare to open thousands of units in the area.

The store at Axis opened in May 2014 and is Marsh's newest store.

If the two downtown Marsh groceries should close, CBRE retail broker Mark Perlstein thinks the landlords will find similar replacements.

“The real estate is good for both of those locations,” he said.

Whole Foods is expected to open a grocery store later this year in the 360 Market Tower apartment development on the northeast corner of Alabama and Market streets, which would make it the only store serving downtown's core.

"That would be great for Whole Foods, but it certainly leaves a vacancy that should be considered by other operators," Perlstein said.

Perlstein thinks the Lockerbie location could be more attractive—particularly to a specialty grocer competing with Whole Foods—because of its smaller size when compared to the larger Marsh space at Axis.

Marsh occupies 43,000 square feet on the ground level of Axis. The Marsh at Lockerbie opened in 1986 as an O’Malia’s. Marsh bought the O’Malia’s chain in 2001.

“That location was our best location for a long, long time,” said Danny O’Malia, the former owner of the Lockerbie store. “It was a big gamble for us, and I would hate to see it go. It’s still one of the best stores in the chain, from what I hear from insiders. I’m a little surprised to see it on the list.”

Any challenges the two downtown Marsh stores might be facing are a reflection on the company as a whole and not on the specific locations, Perlstein said.

“I don’t think there’s anything wrong with the real estate,” he said. “It absolutely is a company-wide situation.”

Beyond the two Marsh stores, the closest major grocery to the Mile Square is a Kroger at 524 E. 16th St.

A Kroger spokesman didn't immediately respond to a request for comment early Monday afternoon about its interest in expanding its presence downtown.

The owner of Marsh Supermarkets is seeking a buyer for the 44 grocery stores that would remain after a spate of closings already scheduled for this month, a spokesman for the company said Tuesday morning.

Sun Capital Partners has hired Peter J. Solomon Co., a New York City-based investment banking firm, to help the company in its quest to unload the stores.

“They’re actively shopping them,” said Thomas Mulligan, a spokesman for Sun.

Indianapolis-area stores slated to close in 60 days if a buyer isn't found:

— 5151 E. 82nd St., Indianapolis
— 1435 W. 86th St., Indianapolis
— 227 W. Michigan St., Indianapolis (Axis at Block 400)
— 6965 W. 38th St., Indianapolis
— 2350 Broad Ripple Ave., Indianapolis
— 320 N. New Jersey St., Indianapolis
— 843 E. Main St., Brownsburg
— 2140 E. 116th St., Carmel
— 2904 S. State Road 135, Greenwood
— 10679 N. Michigan Road, Zionsville
— 5 Boone Village, Zionsville

Others are in Bloomington, Kokomo and Marion, as well as two in Muncie.

Like Perlstein, Catherine Esselman, real estate development manager for Downtown Indy, is confident that the two downtown Marsh locations will get filled, if in fact the stores close.

“I think the locations are right for other [grocery] users,” she said. “I’m not worried about downtown, I’m worried more about the rest of the [Marsh] locations that could be harder to backfill.”

Bill French, a real estate broker at Cushman & Wakefield, is surprised that the two downtown locations are even on the list of possible closures.

“We’ve got a great downtown story,” he said. “I’d be really shocked to see those guys close.”