Here’s our latest news round up from the retail real estate industry:
- Columbus, Ohio-based Stanbery Development has awarded Levin Management Corp. of North Plainfield, N.J., management contracts at The Shoppes at Hamilton in Hamilton Township, N.J., and The Shoppes at Cross Keys in Gloucester Township, also in New Jersey.
- KeyPoint Partners, Burlington, Mass., has signed on to manage 270 Center, a 233,000-sq.-ft. shopping center in Gaithersburg, Md. Dividend Capital of Denver awarded the contract.
- Trademark Property Co., Fort Worth, Texas, has launched Trademark Property Services, a new division that will offer five services to retail and mixed-use property owners: asset strategy, feasibility and research, asset management, leasing and merchandising, development and construction management.
- Weingarten Realty, Houston, has signed Ross Dress for Less, the nation’s second largest off-price retailer, to a 26,000-sq.-ft. lease in Seattle’s Rainier Square Plaza Shopping Center.
- Michael Salove Co. Commercial Real Estate, Philadelphia, has brought Qdoba Mexican Grill to Horsham Gate in Horsham, Pa. Qdoba will join Fresh Market, Corner Bakery, Toys “R” Us, Babies “R” Us and Verizon Wireless in the Jenkintown, Pa.-based Goodman Properties’ center.
Timing appears right to bid on projects
Right now might be a good time for developers and owners to bid and start construction projects and for retailers to consider new leases in areas where they are under-represented.
Why? Construction material manufacturers and commodity vendors are cutting prices, and contractors are sharpening their estimating pencils.
In mid-April, the Bureau of Labor Statistics released the most recent Producer Price Index report, which showed that construction materials were declining in price. The price of materials used by commercial building contractors declined 2.6% over the past year.
And since stimulus funds from the American Recovery and Reinvestment Act started flowing into the states, contractors suffering through the recession have been showing up en masse to bid on available projects. The increased competition has driven prices down.
According to a Washington Post report in early April, Baltimore-Washington International Thurgood Marshall airport officials typically expect two or three construction companies to place bids on projects. They were surprised when six companies placed bids on a renovation estimated to cost $50 million. They were stunned when the newly competitive bidding environment enabled them to let the job for just $42 million.
The Post also noted that a Connecticut road project budgeted for $75 million had been let for $66.6 million.
Commenting on the current environment, Ken Simonson, chief economist for the Associated General Contractors of America, said in a prepared statement:
“The price declines make this a great time for public agencies and private owners alike to start construction projects, particularly because this ‘limited-time sale’ may not last much longer. Copper and diesel prices have recently moved up, and steel markets are sending mixed signals.”
Another statement issued by Simonson in early April said that, “It is growing more likely that real (inflation-adjusted) gross domestic product will rise slightly in the quarter that began on April 1 from the dismal levels of the first quarter. The growth is likely to pick up gradually throughout the rest of the year, but it will be uneven, unlike the downturn that affected all sectors.”
As an example of this unevenness, Simonson doesn’t expect retail construction to resume until early next year. Even so, for developers and owners with access to capital, low prices for materials and construction work could help projects that have been put on hold get back on track; and for retailers interested in holding down leasing costs, lower-cost retail shopping centers may offer lower cost pre-leasing deals.
Waiting for the next big thing
Desperate economic times produce hardship, but they also give rein to creative and innovative thinkers. The Great Depression of the 1930s produced a host of ideas that formed the foundations of today’s retail and retail shopping center industries.
In 1929, for instance, a group of department stores joined forces and formed Federated Department Stores, with headquarters in Columbus, Ohio.
The following year, Edwards Theatres Circuit opened the first multiplex in the United States.
Publix Super Markets was also founded in 1930.
In 1932, Joseph C. Thompson became president of the bankrupt Southland Ice Co. and reorganized as a retail business selling foods and conveniences. Today, the Southland Corp. operates the franchising business that has spread 7-Eleven stores around the world.
“Now’s the time to look for ideas that will catch on,” Spence Mehl, senior VP of New York City-based RCS Real Estate Advisors, told SiteTalk. “Rents get cheaper as landlords need to fill vacant space and drive traffic. Low rents will attract people with ideas and very little money.”
While waiting for the next big thing, landlords are filling space with retail or non-retail businesses. A business that can pay the rent can have the space. So dance studios, karate studios, skating rinks, health clubs and glow-in-the-dark miniature golf courses are moving into malls and shopping centers.
“Empty freestanding big boxes are attracting churches,” observed Mehl. “I have a trade school looking at a 70,000-sq.-ft. space in Indianapolis right now. And discount stores such as Big Lots, Dollar Tree and Dollar General are moving into large empty spaces.”