- The Washington Times - Wednesday, May 23, 2001

LAS VEGAS Safeway is getting rid of some of its smaller, outdated stores to make room for larger, more modern locations in the Washington area.

The nation's third-largest grocery chain is planning to dispose of 25 to 40 properties in its eastern division over the next year.

KLNB Inc., a retail real estate firm with headquarters in Towson, Md., to handle the project, has disposed of three properties this year with several more deals in the works.

But the Pleasanton, Calif., chain is not leaving the eastern market, which has 16 stores in the District, 69 in Maryland and 42 in Virginia.

"They don't want to pull out of any of their locations in the Washington-Baltimore area," said Kevin R. Barrett, a broker at KLNB, who with Andrew E. Feldman is handling the Safeway project.

"The eastern division is a very strong market for them," he added.

The strategy is the company's answer to the changing market and consumers' desire for more merchandise in bigger stores.

Twenty-five years ago, a Safeway store was 18,000 to 20,000 square feet. Today, the company is building 55,000- to 58,000-square-foot stores, which the older locations can't handle.

KLNB brokered the $3.5 million sale of a 32,000-square-foot shopping center on North Frederick Avenue in Gaithersburg.

The company sold its 18,000-square-foot lease on South King Street in Leesburg, Va., to Rite-Aid for $1.15 million. Safeway relocated to a property next door.

In Rockville, Safeway has sold land to Wendy's at 808 Rockville Pike for $1.4 million.

In addition, the company recently bought the abandoned Hechinger building at Old Forte Village shopping center in Prince George's County and will move its existing Safeway store into that location and fill in the old property with other tenants.

The grocery chain also is getting into the gasoline business at a store on Kent Island in Chester, Md. The 57,000-square-foot location includes a pharmacy, Starbucks, a bank and has about 300 square feet for eight gas pumps.

"The objective is to increase the frequency of shoppers," Mr. Barrett said.

Safeway's plan to dispose of properties around the Washington area will continue over the next several years, Mr. Barrett said.

"We are seeing a number of strategic locations becoming available, which will present excellent opportunities for retailers and investors in the Baltimore-Washington, D.C. market," he said.

The targeted tenants to fill the properties run the gamut from other retailers and service companies to technology firms or office space.

But for competitive reasons, KLNB cannot fill the existing properties with another supermarket, pharmacy or gas station.

The number of retailers getting rid of their space is soaring to new highs, according to a recent report issued by KLNB, which is handling the projects for a number of retailers including Shoney's, Roy Rogers, SuperFresh, Service Merchandise, AMF Bowling Centers, McDonald's and Weis Markets.

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