Across the country, in neighborhoods wealthy and poor, cities have tried to cultivate downtown development with grocery stores ― with mixed success.
Some have thrived, but others have struggled, especially in the wake of the COVID-19 pandemic, with reduced numbers of employees spending their working hours in central business district offices.
Downtown Des Moines' Court Avenue Hy-Vee may be a case in point. It drastically cut its hours in February, then partially restored them this month under pressure from the city, which had mandated longer hours in a development agreement that provided millions in incentives to get the store built.
"I think it’s a sign of the times," said Phil Lempert, a grocery industry analyst who visited the Des Moines store shortly after it opened in 2017. "As we go across the entire country ... we’re seeing stores that were built pre-pandemic that have really suffered as people have changed the way they work."
Is the downtown Des Moines Hy-Vee making money?
Hy-Vee spokesperson Tina Potthoff has declined to discuss the downtown store's financial performance, saying the cut in hours was prompted by a decline in customer traffic and a rise in crime and disruptions at the store ― the latter claim disputed by Des Moines officials and police.
It's not the first turmoil over the store. In 2021, Hy-Vee announced it would rebrand it as a stand-alone HealthMarket, a name it would share with sections in larger Hy-Vee stores that focus on healthy foods and supplements. It later put that idea, greeted with trepidation by downtown residents, on hold. Its only stand-alone HealthMarket, in West Des Moines, has been replaced with Wall to Wall Wine and Spirits.
And right before the cut in hours earlier this year, the company said it was planning to partition parts of the store, with separations between the liquor section, coffee and dining areas and the rest of the store.
Des Moines residents and analysts have speculated that the moves indicate the store may not be profitable, or as profitable as Hy-Vee would like.
It serves a fast-growing downtown population estimated at 11,000 or more people. But the loss of downtown workers in the wake of the COVID-19 work-from-home movement is a countercurrent to that trend. Nationwide Mutual Insurance, among other employers, has reduced its downtown footprint. And Wells Fargo, once the Des Moines metro's largest employer, has moved many of its employees from three downtown Des Moines buildings to its West Des Moines campus as it faces headwinds in its locally based home mortgage business.
Lacking sufficient office tenants, the owners of two major downtown office buildings, Two Ruan Center and the Financial Center, in recent months have announced their intention to convert some or all of their floors to residential use. And the effect of reduced daytime retail customer traffic is apparent in the closures this year of and the Walgreens on Walnut Street, a departure that marked the end of that chain's nearly centurylong presence downtown.
Cedar Rapids councilman says Hy-Vee's planned closure 'feels like abandonment'
While Hy-Vee sought to cut operating hours at its downtown Hy-Vee store, it's going even further with three other in-town Iowa stores, announcing plans to close locations in Cedar Rapids, Davenport and Waterloo.
As with the downtown Des Moines store, Hy-Vee in 2002 got a city incentive package to build a new store in a Cedar Rapids neighborhood on the edge of downtown. The city kicked in $975,000, or 27% of the total cost, for the chain to replace an older store there and preserve residents' access to fresh food.
The store, which will cease operating June 23, serves two neighborhoods that the U.S. Department of Agriculture designates as low-income, according to the Cedar Rapids Gazette.
"Unfortunately, these locations have not met our financial expectations over the past several years," Potthoff said in a statement about the planned closures.
Cedar Rapids City Council member Dale Todd, who helped negotiate the incentive package for the Cedar Rapids store, told the Corridor Business Journal that Hy-Vee's decision blindsided city officials and would hurt some of the city's most vulnerable residents.
“We understand the challenges and complexities of running a business in an inner-city neighborhood and we are sensitive to their need to make money, but instead of working with us to address the inherent challenges, this feels like abandonment and a run for the suburbs,” Todd told the publication.
He provided a 2001 development agreement to the Register that said "a full-service grocery store is considered an essential element required to sustain a viable residential neighborhood."
Full-size grocery stores catalysts for downtown growth, proponents say
The demographics of downtown Des Moines, with its pricey condos and apartments, are different from those in the Cedar Rapids neighborhoods. But the desire for a grocery store there had a similar motivation: to make the neighborhood more sustainable.
Securing the downtown Hy-Vee, which opened in 2017, was seen as a major coup for Des Moines, which spent decades and hundreds of millions turning the area once jokingly called "Dead Moines" into a vibrant city center with a round-the-clock population.
"Downtown is not just a business district. It's not just a cultural center. It's also a neighborhood. That means you need the full range of amenities that people expect in a neighborhood," council member Josh Mandelbaum, whose Ward 3 includes downtown, said of the store's importance after the unannounced hours cut in February.
In the years before Hy-Vee's opening, other downtown grocers came and went. Riverbend Trading Co., a 3,000-square-foot store at 208 Court Ave., operated only about six months, from July 2007 to January 2008.
A pair of predecessors also failed to thrive. Fourth Street Grocery opened in 1996. The 1,600-square-foot store at 210 Fourth St., which had a meat department and a deli and sold fresh fruits and vegetables, closed in the early 2000s.
Village Market at 325 E. Fifth St. tried its hand in May 2007 but, like Riverbend, closed just six months later.
Des Moines sought to solve the problem with public investment: a $3.3 million rebate on the city-owned land for the supermarket chain and building owner Knapp Properties and a share of the taxes the Hy-Vee store and its upstairs apartments generate.
Des Moines isn't alone in using public dollars to try to obtain a downtown market. Similar to Hy-Vee, the Meijer grocery chain, known for its Walmart-sized superstores, opened the smaller-scale Bridge Street Market in 2018 in downtown Grand Rapids, its headquarters city. According to mlive.com, it received a large municipal financial commitment of $13.2 million in tax increment financing and a $6.3 million low-interest loan to build the 37,000-square-foot store, almost the same size as Hy-Vee’s 36,000-square-foot downtown location.
A memo from the Michigan Strategic Fund Board said Bridge Street Market was critical to attracting more residents to downtown Grand Rapids.
"It is expected that a full-service grocery store in the downtown will be a significant catalyst," the memo said. "Access to fresh food and staple grocery items is a key criteria to a large segment of the population when making choices about residential options."
Kroger likewise got a large pot of financial incentives when it opened a 45,000-square-foot downtown store in its hometown of Cincinnati in 2019.
Kevin Ketels, a Wayne State University of logistics professor, told the Cincinnati Enquirer a supermarket was critical for continued urban growth.
“There are certain assets every community needs to keep attracting new families and residents: a supermarket is one of them,” Ketels said. “It’s one of those fundamental elements to keep growing and existing.”
Some downtown grocery stores thrive, but many others struggle
Some downtown stores have thrived, including independent grocers like Cosentino's Market in the Power & Light District in Kansas City, Missouri. It opened its 33,000-square-foot location in 2009.
At the time, Michael Hurd, then a spokesperson for the Kansas City Downtown Council, told the Kansas City Star that the store marked an important milestone for Kansas City.
"The No. 1 amenity downtown residents and downtown employees ask for is a grocery," Hurd told the Star in 2009. "It's been a missing piece for a long time and a big step for the ongoing revitalization of downtown."
Likewise, Wohlner's Neighborhood Grocery & Deli opened in 2010 in Midtown Crossing, a 16-acre mixed-use development in Omaha, Nebraska. It's in a booming part of central Omaha about a mile from the growing University of Nebraska Medical Center campus.
"From the beginning we felt that having a grocery store ... was critical to the success of the development," Jim Nolan, a spokesperson for Mutual of Omaha, which bankrolled the project, told the Omaha World-Herald in 2009.
But other projects have run into trouble. In April 2023 Whole Foods closed a 65,000-square-foot store in downtown San Francisco after just a year in business because of safety concerns, according to the San Francisco Chronicle and ABC News.
In September 2022 Rory’s Market + Kitchen, a small Northeastern chain, opened in downtown Providence, Rhode Island. About a year later the store closed for “personal reasons,” according to The Providence Journal.
And in Buffalo, New York, the city’s Common Council gave downtown independent grocer Braymiller Market a $563,000 forgivable loan last July because the store needed operating capital to stay in business.
Nonprofit news outlet the Investigative Post reported that the Braymiller Market cost $6.9 million to build but got $8.3 million in tax breaks before it opened in 2021. It said that together, the store and a neighboring apartment project got $58.9 million in subsidies and tax credits.
Yet residents at the neighboring complex have complained that they cannot shop at the store because of its high prices, according to The Buffalo News.
Full Court Press co-owner Andy Massoth ran the restaurant company's River Bend Trading Co. venture in Des Moines in the building that now houses the group's Royal Mile Pub. He said it went under after shoppers balked at its high prices. Residents told him that if they had a car they drove to bigger nearby stores where groceries cost less.
"We thought that downtown residents would be so grateful that we did this that they would go out of their way to support us," Massoth said.
"They want the store downtown if they live downtown, but they’re not going to do a lot of their shopping there," he said.
How are urban stores different from suburban stores?
The problem, Lempert said, is that urban and suburban stores operate on different models. At urban stores people shop more often, but purchase fewer things, Lempert said. At suburban stores the reverse is true: Customers buy more, but shop less often.
"In an urban store people are looking for convenience," Lempert said. "They’re looking to get in and out."
Downtown Neighborhood Association President Brandon Brown shops weekly at the Court Avenue Hy-Vee, but hears from residents who, as Massoth complained, say they shop there only for the items they need the most because they believe prices at the store are higher than in other supermarkets.
"The downtown Hy-Vee is often seen as a location to go pick up essentials that are not necessarily in your house at that time," Brown said.
Massoth, downtown residents and others said they believe Hy-Vee charges 10% to 20% more for items downtown than at other stores. Potthoff, the Hy-Vee spokesperson, denied that, though exact figures were not available because store managers have wide latitude to set prices.
An informal Des Moines Register analysis of 27 randomly selected items at the Court Avenue store and seven other metro stores showed that prices for some items were higher downtown, but lower for others.
Downtown resident David Jennings does most of his grocery shopping during monthly trips to Costco, but said he stops by the Court Avenue Hy-Vee two to three times a week, usually to pick up dinner.
It is "kind of expensive," Jennings said.
Another difference is that urban stores, whether in business districts like Des Moines' or neighborhoods like in Cedar Rapids, pull in more walk-in traffic than suburban stores. But even for many downtown residents, life in Des Moines still revolves around cars, which hurts downtown retailers, said Downtown Chamber of Commerce Executive Director Jimmy Olsen.
"We’re becoming in some ways like bigger cities, but yet we’re still trying to hold on to the small town stuff," Olsen said.
And there are differences in the customer base. Downtown is slowly attracting more families with children, the customer base for suburban stores. But most of the downtown population remains single, childless couples and empty nesters, who don't consume as much and are less likely to cook for themselves.
"Depending on the population, if it’s a single, Gen-Z, millennial population, they’re looking for more exciting things, more exciting foods, more exotic foods," Lempert said. "Things like that attract that generation because it’s a little different. It’s exciting. It’s something that they can’t get elsewhere. So you’ve got to keep on doing those kinds of things to get people excited."
Des Moines resident is thankful downtown store will, for now, stay intact
At a May 6 Des Moines City Council meeting the city allowed Hy-Vee to reduce the hours at the store below what is required by the development agreement for the next two years. It also amended the development agreement to limit the degree to which Hy-Vee could partition sections of the store.
Hy-Vee hasn't publicly addressed what will happen after the two years is up.
Downtown resident Carol Maher, who attended the meeting when the council signed off on the changes, said she was just pleased that Hy-Vee is keeping the downtown store open.
"Thank you to the city for making this a priority and working hard to keep them downtown for myself and my neighbors," Maher said. "And I hope that the relationship can continue and that we continue to have a good partner for the city."
Staff writer Addison Lathers contributed to this article.
Philip Joens covers retail and real estate for the Des Moines Register. He can be reached at 515-284-8184, pjoens@registermedia.com or on Twitter @Philip_Joens.
This article originally appeared on Des Moines Register: Des Moines wanted a downtown grocery store. Why is Hy-Vee struggling?
