Whole Foods has been in talks to open a store at Geary and Masonic in the space occupied until recently by Best Buy, which is now closed. But another tenant of the mega-retail complex there, the City Center Target, has lease restrictions in place that could deter Whole Foods from moving onto its turf.
Target’s objections aren’t to Whole Foods, but to Amazon, which bought Whole Foods for $13.7 billion this summer. Amazon, Target fears, could use Whole Foods stores, located in affluent neighborhoods, as Trojan Horses for general fulfillment centers. They’re potential storage and delivery hubs that could stock all manner of consumer goods in direct competition with Target and other big box stores.
As City Center’s anchor tenant, opened in 2013, Target gets a say in potential tenants like Whole Foods through restrictions written into its lease agreement. Target could veto certain of Amazon’s potential initiatives, like Amazon Locker pickups at Whole Foods. Another San Francisco Target at the Stonestown Galleria reportedly raised similar objections to a potential Whole Foods neighbor there.
Target isn’t alone: Bed Bath & Beyond, Best Buy, and German grocery chain Lidl all regularly include language in their lease agreements that would limit the possible use of Whole Foods stores. And after interviewing 20 retail landlords, lawyers, and brokers, Reuters suggests that these prevalent leasing restrictions could complicate Amazon’s plans for Whole Foods. Nearly all of Whole Foods' 473 stores are subject to lease agreements, Reuters writes, and the company plans to add as many as 85 new stores according regulatory filings.