Sobeys seems to be rather new to getting into the more 'urban' format stores; as opposed to loblaws. But based on what I've seen of them out here in Calgary - there is still resistance on their parts to go urban format in suburban areas. If I were to guess, it's probably because the only time they want to be landlords is when it's for them only. They don't seem to have a problem with moving into a development once its getting populated and there isn't a store around to serve the area (like the sobeys that ALPS pointed out). But where they seem to have problems (both sobeys and loblaws and I"d guess safeway and Save on foods) is when you get into new mixed use developments.
Face it; they aren't residential or property managers. They run grocerry stores - so they wouldn't have an interest in redeveloping a site to include residential
unless they partnered with a developer; sold the land; then leased the location at a reduced rate as a condition of sale. This is an example of a situation they would be inclined to probably get in on. OR they would move into a new mixed use development if the market in the area was good (but they didn't have the building built nor would they run it).
If I were to guess it would redevelop pretty much as is, just a bigger and better layout and no residential. If you wanted to see Queen Street or even the Superstore on Young or Joe Howe redevelop - the developer would have to buy the land off them; incorporate the store (temporary close; tear down and build a footprint into the new development) and then add residential.
A lot of stores in the US are getting on board the mixed use bandwagon; but they too don't want to be property managers. I had the privilage to deal with the developer who built
this development in Seattle and I asked him about Wholefood moving in. He was telling me that Wholefoods only moves into a mixed use development when it's built for them - they never build something themselves. I suspect its the same way here in Canada.