The departure of large retail anchor tenants like Toys "R" Us in a market with fewer expanding big-box players surely causes concerns for shopping center owners and operators. Yet transformation is nothing new for the retail industry and anchor shifts such as these shifts present sizeable vacancies, but as the same time, significant opportunities.
Rewind to the late 1970s and early 1980s. E.J. Korvette and W.T. Grant, once thriving department store anchors, shuttered their locations. A generation of successors, including the now defunct Caldor and Bradlees chains, took over many of those spaces. Today, brands like TJX and Kohl’s have replaced them. Yet in the current climate, backfilling an anchor space may require a different approach than in the past. This year’s Toys “R” Us vacancies come at a time when the industry is still working to absorb remaining Sports Authority boxes that came online in 2016. Some locations will fill with a like-size concept, but in most cases landlords and property operators need to get creative.
To that end, we are seeing a growing emphasis on retail space reconfigurations designed specifically to accommodate a new generation of tenants. Established retailers rethinking expansion with new footprints and new retail concepts are both coming online, and shopping centers are being reinvented to better serve and succeed in their marketplaces.
As always, landlords need to offer the best possible product. Curb appeal and quality accommodations are paramount. Yet beyond that, every property is different, and today’s modernizations come in all shapes and sizes. Multiple factors – including those related to the market and the property itself – come into play when determining and executing the “right” strategy for stabilizing or building anchor occupancy.
When analyzing the regional marketplace, it is important to examine the demographics, the current tenant base, and the competition. What do other centers offer, and what does the pipeline for new development look like? What retailers are already in the market, and which are not? Who might want to move and improve? What do consumers want, and what does local government advocate? Good working relationships with the community and local officials can be just as important as demographic profiling and gap analyses. The size, layout, current tenancy, and flexibility of a center also help to determine the best direction for a property.
Consider North Village Shopping Center in North Brunswick, N.J., where Levin Management serves as leasing and managing agent. Located at the heavily traveled intersection of U.S. 1 and U.S. 130, and passed by more than 100,000 vehicles each day, the property has enjoyed a long history of leasing success. In 2016, Barnes & Noble vacated a 25,000-square-foot anchor space at the property. While filling it with a like replacement was one possibility, we recognized that the time was right to re-examine what made sense based on the needs of the community and current, strong regional demand for well-located, quality retail space.
We opted to carve out a portion of the former Barnes & Noble space to accommodate a specialty grocer – high on the North Brunswick community’s wish list – and subsequently secured a lease with Trader Joe’s. This strategy enabled us to allocate the balance of the vacant space for additional retail units. As part of the resulting retrofit, our construction team completed a program of exterior and common area renovations, and widened one of the property driveways.
The new Trader Joe’s has bolstered North Village Shopping Center’s competitive position. Following the supermarket’s late 2017 opening, the property has drawn new commitments from Ulta Beauty and Sport Clips. They join co-anchors Bed Bath & Beyond, Michaels Arts & Crafts, and Staples, and other national food brands Panera Bread, Smashburger, and Chili’s.
North Village Shopping Center’s reinvention demonstrates how a strategic and creative approach can bolster even an established, preeminent regional shopping destination. In fact, the latest reinvention is the second our firm has orchestrated at the property. In 1999, the center faced an even larger vacancy challenge when an A&P supermarket moved to a competing property and Bradlees closed. Levin directed an extensive renovation, shaving 40 feet of depth off the front of a portion of the building to accommodate a re-tenanting with big-box retailers. Barnes & Noble was among the first “new” tenants to commit.
Ultimately, North Village Shopping Center has come full circle and is now positioned to attract retailers that will serve the North Brunswick community for years to come. The bottom line is that anchor tenants continually change. Yet one constant remains in the fact that repositioning shopping centers through renovation and/or redevelopment plays an important role in the evolution of retailing and the retail real estate industry.
Matthew K. Harding is president of Levin Management Corporation, a retail real estate development and management company based in North Plainfield, N.J.