Markets to Watch
Remember 2011 and 2012? Back then, the forecasters were saying that the economy would probably be sluggish through 2013. After that, starting in 2014, growth would return.
Well, it’s 2014, and the prognosticators are cheering. More to the point, retail sales forecasts are glowing. Kiplinger, for instance, is calling for retail sales gains of 5.2% to 5.7%, a significant bump up from last year’s 4.5% increase. Fueling the increase will be an expected 3% rise in personal income. More personal income, more retail sales. What retail markets will benefit from this growth? Where are retailers putting their new stores?
“I recently spoke with a major national discount retailer that is planning 500 new units this year,” said Bill Rose, VP and national director of the national retail group at Marcus & Millichap, based in Calabasas, Calif. “They are looking at Denver, Salt Lake City, Albuquerque, Boise — the Mountain States markets.”
Retail development is also moving away from the outer suburbs to infill areas closer to and inside cities, noted James McCandless, director of retail with Washington, D.C.-based Streetsense, a multidisciplinary design and strategy firm specializing in retail, restaurant and hospitality real estate solutions. “Today’s young professionals want to live downtown or near downtown and close to where they work,” he said. “They don’t want hour-long commutes to work. New city apartments are accommodating them. Developers are also building modern downtown markets like the cutting-edge Union Market on New York Avenue in Washington, D.C., which was developed by EDENS.”
Examples of active markets include the Bay Area in California, the Boston metropolitan region and Center City Philadelphia.
Bay Area, California
The Bay Area has become vibrant with retail development. “Watch the Bay Area, and you’ll see many new market entrants,” said John Cumbelich, a principal at Walnut Creek, Calif.-based John Cumbelich & Associates, an X Team International partner. “A significant group of proven national retailers with zero activity in the Bay Area before the recession is entering the market — Dick’s Sporting Goods, Dunkin’ Donuts, Hobby Lobby, LA Fitness and Ulta.”
Hot areas for retail expansion in the Bay Area include Walnut Creek, San Jose and, of course, San Francisco.
A number of projects are in the works throughout the city of Boston, including nearly a dozen in the Seaport District, as the South Boston waterfront is called. One of the more notable projects in the Seaport District is Fan Pier, a 1 million-sq.-ft. mixed-use project with office, residential and retail components. The Boston-based Fallon Co. is developing it.
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Seaport Square is the city’s biggest new development. It is a 6.3 million-sq.-ft. mixed-use development with office, residential and retail. The retail portion of the project, the 260,000-sq.-ft. One Seaport Square, is being developed by Chestnut Hill, Mass.-based WS Development.
In the middle of the financial district, an area called Downtown Crossing, New York City-based Millennium Partners is redeveloping a former Filenes building into a mixed-use project called Millennium Tower.
The Philadelphia Story
Philadelphia is second only to Boston in university student population. It also has the third highest residential center city population in the United States and it’s growing. Thousands of market rate apartments are being redeveloped and constructed new throughout the city.
“Philadelphia’s restaurant and retail markets are on fire,” said Douglas Green, a principal with Philadelphia-based Michael Salove Co., a retail real estate advisory and brokerage firm. “The restaurant scene is incredible. More seats are added weekly, and demand just keeps growing.
“The retail market is as active as it’s been in six or seven years. We’re back to pre-recession levels of demand and rents.”
Let Us Entertain You
As a category of shopping center, open-air centers have been evolving ever since the days they were called lifestyle centers. New categories of tenants have evolved, along with new ways of creating compelling tenant mixes and environments. We asked three open-air owners to tell us about current and possible future directions that evolution may take.
The companies are San Diego-based American Assets Trust; Irvine Co. Retail Properties in Irvine, Calif.; and Columbus, Ohio-based Glimcher Realty Trust. Here’s what they had to say.
American Assets Trust Remembers the Alamo
American Assets Trust acquires, develops and manages retail, office and residential properties primarily on the West Coast, in Texas and in Hawaii. Its retail portfolio consists of 12 shopping centers spanning 3.1 million sq. ft. The company’s open-air properties include four centers, totaling about 1.9 million sq. ft. Each has its own unique character. Consider San Antonio’s Alamo Quarry Market, for instance.
“Alamo Quarry Market starts in the morning and continues into the evening,” said John Chamberlain, president and CEO of American Assets Trust. “It entertains while satisfying daily necessities.”
Not far from the historical Alamo, Alamo Quarry Market can entertain with a photograph. Check out the accompanying photo with five white smokestacks. The 589,479-sq.-ft. center stands on the site of the old Alamo Cement Company. The center’s design incorporates the cement company’s original smokestacks, rock crusher building and clinker building.
The unique environment attracts retailers, restaurants and entertainment that fill the center with people.
“We have the area’s dominant theater,” said Chris Sullivan, VP retail leasing with the company. “When you have the top theater, restaurants follow, and restaurants are entertainment.”
The development boasts 19 eateries, including high-end, sit-down restaurants such as Piatti Italian Ristorante, a growing chain with nine locations; Fleming’s Prime Steakhouse & Wine Bar; California Pizza Kitchen; and a mix of other well-known names.
Alamo Quarry Market is also home to a Whole Foods Market, with its interactive offerings such as cooking and nutrition classes and other events.
Restoration Hardware, Whole Earth Provision Co., Pottery Barn, Lucchese Boot Co. and Banana Republic fill out the list of more than 60 retailers.
Glimcher Evolves into Mixed-Use
Glimcher Realty Trust owns material interests in and manages a portfolio of 29 retail centers spanning about 19.2 million sq. ft. About one-quarter of the properties are open air. Some are open-air retail in mixed-use developments.
“We would like to evolve to mixed-use,” said Michael Glimcher, the company’s CEO and chairman of the board. “We think more uses give people more reasons to come to the property.”
Scottsdale Quarter in Scottsdale, Ariz., is an example of Glimcher’s mixed-use concept. Currently at 600,000 sq. ft., it has 400,000 sq. ft. of retail. The project blends retail, restaurants, entertainment and office space. Apartment buildings are under construction now. “We try to emulate cities with our properties,” Glimcher said. “Here we have a great outdoor fountain and 152 date palm trees. There are 10 restaurants, service uses, an Apple Store and Nike. It has all the elements we love.”
Glimcher particularly likes the Restoration Hardware Gallery at Scottsdale Quarter. It is the 3-year-old showroom prototype that rolled out in Houston in 2011. “When we made the deal, there were zero open,” he said. “Ours is the second or third of its kind. They are one of the most exciting retailers out there.”
It is a 20,000-sq.-ft. house with a roof deck. The rooms are built out. If you like the room, you buy it — or part of it.
What does Glimcher foresee in the future for open-air centers? “I think the lines are beginning to blur,” he said. “I can see an indoor mall connected to an outdoor center.”
The All-Open-Air Irvine Co.Retail Properties
Irvine, Calif.-based Irvine Co. Retail Properties maintains a portfolio of 39 centers, which includes three large regional centers and 36 neighborhood and community centers. Every one of them is open air.
“Part of the excitement of open-air retail is the continuing evolution,” said Ken Gillett, senior VP operations with Irvine Co. Retail Properties.
For instance, a new restaurant concept called Urban Plates recently opened at the 334,000-sq.-ft. Crossroads community center in Irvine. It is a farm-to-plate restaurant. The food comes from local farms and producers, and chefs prepare the plates right in front of the customer.
Overlooking the Pacific Ocean, the super-regional Fashion Island in Newport Beach spans 1.3 million sq. ft. “Fashion Island opened in 1967 and has evolved constantly,” Gillett said. “Last year, we added a Whole Foods Market. Specialty grocers are becoming part of the entertainment mix in open-air centers.”
Whole Foods’ entertainment value comes from the classes and events, locally brewed craft beers, the restaurant — Back Bay Tavern — and, of course, its grocery offerings.
“Food creates return visits in our centers,” Gillett continued.
Of course, it isn’t just food. It’s the combination of food, shops, entertainment and design.
“Design is a matter of paying attention to large and small details,” Gillett said. “Landscaping helps create great public spaces. So do comfortable furniture, water features, music and even the Wi-Fi. People expect Wi-Fi today — and it has to be good Wi-Fi.”
Fashion Island has already taken the next step in entertainment by bringing in Island Cinema, which offers state-of-the-art technology, luxurious seating, and, of course, dinner and wine.
Haier bids adieu to Broadway with new HQ
Home appliance and consumer electronics manufacturer Haier America has chosen the northern New Jersey town of Wayne as the location of its new 56,000-sq.-ft. U.S. headquarters.
The new facility will be home to 200 employees, training centers, customer service operations and a product showroom where retailers can see new products and concepts. Renovations are currently underway on a building at 1800 Valley Road in Wayne, N.J., that will replace the company’s current office at 1356 Broadway in Manhattan this fall.
“As Haier continues to develop our footprint across the Americas, we believe it is important to establish a facility that is ready for the expansion,” said Adrian Micu, president and CEO of Haier America. “We are building an organization better suited to support our customers and consumers through a more holistic consumer-centric approach and the new facility will foster this collaboration.”
Haier America is part of the Haier Group, a global company with more than 70,000 employees and annual sales of $29.5 billion.