MADISON, Wis. -- Plans to open a new Whole Foods Market in the Hilldale Shopping Center on the city's West Side fell apart on Friday when both sides announced the grocery store chain was ending its lease.

The Texas-based Whole Foods Market and mall developer Joseph Freed and Associates of Chicago announced Friday that they've ended their lease for the big grocery due to the state of the national economy.

The parties said they jointly agreed to end the project at the Hilldale Shopping Center because "retail and financing conditions" worsened significantly during the last three weeks.

"Just like many retailers across the country, Whole Foods Market is reexamining its growth strategy in light of the current economy," Whole Foods spokeswoman Kate Klotz said in a statement. "Our goal is to scale back our growth plans with as little negative impact to local markets as possible. This includes very recently having to reconsider opening a new store in the Hilldale Shopping Center."

Whole Foods officials said that they plan to keep open their existing store at 3313 University Ave. "for the foreseeable future."

The company said that the country's shaky economy played a pivotal role in the decision.

Whole Foods said it'll continue to operate its store on University Avenue as the developer pursues other avenues for redevelopment of what is now a huge hole at Hilldale.

Freed and Associates met with the city Friday afternoon and told officials it's still committed to putting something in there next year.

Mario Mendoza is a business liaison for the mayor's office in the city.

"We're just hoping for a good development that meets the needs of the neighborhood and the developer and will be a fine addition to a really important thoroughfare in our community -- that being University Avenue and the Hilldale area," he said.

Whole Foods backing out is a blow to some, who've seen Hilldale transform itself over the last several years from a '70s-style mall to a modern mixed-use development, including the Sundance Cinemas.

But the city said the mall developer is optimistic about have some kind of new development ready for city review by the end of the winter.

Mendoza said the neighborhood and alder worked well on the 65,000-square-foot project, and he hopes that happens again with whatever new deal gets put together.

Freed and Associates said that they will talk with city officials about finding new tenants for the shopping center, which has undergone an overhaul in the last two years.

Last month, the move-in date for the new Whole Foods was pushed back to late 2010 and not 2009 as previously planned. The developer blamed an unsteady economy and shaky market.