Kroger pays $10.4 million for Oakwood site earmarked for grocery-delivery hub

The Kroger Co. paid $10.4 million for a suburban Cuyahoga County site where the grocer plans to build a robot-powered grocery-delivery hub.

Public records show that a Kroger affiliate finalized the 28-acre land deal, in Oakwood, in late March. The seller was Premier Development Partners, a Cleveland real estate company that assembled the formerly residential site and had it rezoned for commercial uses.

Kroger, which closed its last Cleveland-area stores in 1985, is returning to the region with a standalone delivery model. The Cincinnati-based grocer expects to serve customers in Northeast Ohio and Pennsylvania from its new facility, which will employ up to 400 people.

The 270,000-square-foot delivery center will rise along Interstate 271, at the southwest corner of Alexander and Macedonia roads. Construction will take about 24 months.

The $100 million Oakwood project is part of Kroger’s growing partnership with the Ocado Group, a British technology company focused on e-commerce. Kroger opened its first such delivery operation a year ago, north of Cincinnati, and has rolled out similar buildings in Georgia and Florida.

The fulfillment centers offer grocery delivery to households up to 90 miles away. Inside the buildings, more than 1,000 robots traverse three-dimensional grids to gather fresh, frozen and packaged foods. Employees pack orders and load them into refrigerated vans for delivery.

Kroger aims to double its digital sales and profitability by the end of 2023, during a time of fierce competition for consumers’ food dollars and swift change in the traditionally low-margin industry. The delivery model is allowing the nation’s largest grocer to broaden its offerings in established markets while growing into new territories without brick-and-mortar stores.

“Kroger is incredibly excited to expand our delivery business in our home state and provide northeast Ohioans access to thousands of fresh and popular products,” said Gabriel Arreaga, the publicly traded company’s senior vice president and chief supply chain officer, in a news release last month.

Crain’s first reported on the potential Oakwood project in early November, four months before Kroger publicly committed to the deal.

On March 2, the Ohio Tax Credit Authority signed off on a job-creation tax credit tied to payroll at the site. That eight-year incentive is worth an estimated $1.962 million, according to the Ohio Department of Development.

Kroger worked on the incentive package with JobsOhio, the state’s private nonprofit economic development corporation, and Team NEO, the group’s regional affiliate. State records show that Ohio was vying against Pennsylvania for the project.

On March 8, Oakwood’s council approved a development agreement between the village and the grocer. Officials agreed to provide partial property-tax abatement for new buildings on the site, along with tax-increment financing that will reallocate additional new property-tax revenues to paying off project costs.

As part of that agreement, Kroger pledged to donate money to Oakwood’s youth program and the Bedford City School District.

“Oakwood is thrilled that Kroger has selected our village to be the location of one of its highly automated, robotics-driven fulfillment centers. … It will transform the grocery retail experience in Northeast Ohio,” Mayor Gary Gottschalk said in a news release last month.

“It will also have a tremendous impact on Oakwood village,” he said, “including a job-creation target of 400 associates with an annual payroll of $18 million and a $1 million donation over 20 years introducing Oakwood’s youth to cutting-edge automation, artificial intelligence and robotics, with adult education in the evenings to come.”

Premier amassed the Oakwood site over several years, through a series of deals with the village and homeowners. The company is not developing the project for Kroger.

Kevin Callahan, a senior partner at Premier, said he’s proud to have worked with the mayor and the village to secure such a substantial project, backed by such a well-known company.

“I’m delighted,” he said during a phone conversation.