Hot Markets: Houston
Last August, Hurricane Harvey blew in off the Gulf Coast and devastated Houston. The $125 billion in damage ranks as the second highest total for a natural disaster in U.S. history. But months later, Houston is open for business welcoming national chains to move into more than 5 million sq. ft. of retail space completed in the past year.
“Harvey’s impact on retail properties was minimal,” said David Luther, first VP at Marcus & Millichap’s Houston office. “There was some flooding in northern areas, but national brand tenants didn’t skip a beat and started repairs immediately.”
Population and job growth continues on the upswing in Houston, which added more than 63,000 jobs last year, a third of them in office locations. The uptick in retail construction comes after some fallow years and is concentrated largely in northern suburban towns such as Tomball, Cypress, Spring, and The Woodlands. The construction of a third beltway around the city is fueling much of the growth, with grocery-anchored centers leading the way.
“The third ring is near completion, and whenever you’ve got a new highway, you’ve got rooftops and commercial following,” Luther said. “Big grocers like H-E-B and Kroger wanted to be first in. They can afford to build in an area and lose money and wait for the rooftops.”
Much of the new retail GLA is emanating from mixed-use projects under construction in north Houston. The recently opened Valley Ranch Town Center in New Caney presents an eclectic mix of entertainment, necessities, and national retail. Among the first to open there are Kroger Marketplace, Hobby Lobby, Cinemark Theater, Mattress Firm, and Chick-fil-A.
CityPlace in Springwoods Village, now under construction, is a 60-acre mixed-use project near the Exxon Mobil campus that will present 400,000 sq. ft. of retail along with a luxury apartment complex, office space, a Marriott Hotel, and City Place Plaza — an open-air venue for concerts, fairs, and other events.
What’s most in demand, however, are neighborhood centers such as the small-shop centers and shadow-anchored centers that have, for example, a Chipotle, a Mattress Firm, and service-oriented centers, Luther said.
Specialty retailer files for bankruptcy—again; looks for rent breaks
A footwear chain specializing in comfort shoes has filed for Chapter 11 protection for the second time in about 10 years.
The Walking Company Holdings Inc. filed for bankruptcy in the U.S. Bankruptcy Court in Delaware. It already had agreed to the terms of a Chapter 11 plan with its key creditors.
The retailer, which operates 208 stores, said that negotiations with its major landlords are already underway which will allow the company “to rationalize its lease portfolio of mall-based stores, bringing it in line with current market rents.”
Walking Company said its controlling shareholders have committed to $10 million equity investment, and it has obtained debtor-in-possession (DIP) financing from it lender, Wells Fargo Bank, for up to $50 million. Wells Fargo will provide “exit” financing that, in addition to the company’s ongoing cash from operations, will allow The Walking Company to move forward “as a substantially stronger company.”
“This recap is the final step in transforming The Walking Company into a more vertically integrated, omnichannel retailer that can not only survive but thrive in the current retail environment,” said CEO Andrew Feshbach. “The Walking Company has been very successful in developing its ABEO brand, which we have integrated with the sale of other leading comfort footwear brands from around the world. We also have made great progress in integrating our mall-based chain with our other channels of distribution, including Internet, wholesale sales to independent comfort shoe retailers, and international expansion.”
Walking Co. cited the loss of a contract from its largest vendor, Deckers Outdoor Corp., makers of UGGs, as among the reasons for recent troubles.
“As a result of the difficult environment for store-based retailing in 2017, Walking Co. could not replace the lost UGG sales fast enough,” Feshbach said in a court declaration.
Reimagining the American Mall: Project profiles
It’s the worst-kept secret in retail real estate. Consultants preach it and researchers chart it. Customer experience is No. 1; shopping is No. 2. Eateries and entertainment brands are desired, department stores are repurposed.
A recent study from A.T. Kearney relabeled shopping centers and malls of the 21st century as customer engagement spaces. A survey of 81 leading malls by JLL found that adding new food and beverage options was top of the list of the biggest changes being made. And more than half of those properties were linking dining innovations to new entertainment concepts.
Chain Store Age spoke to three operators of those big regionals to find out how they are rethinking them and remaking them.
Below are three profiles of projects in various stages of development from Starwood, PREIT, and CBL.
Fashion District Philadelphia
- Location: 9th Street and Market Street, Philadelphia
- Size: 838,000 sq. ft.
- Developer and owner: Joint venture between PREIT and Macerich
- Key tenants added in past two years: Current: Century 21 and Burlington. Key announced leases: AMC Theatres, H&M, Columbia Sportswear, Levi Strauss & Co., Wills Eye Hospital, Skechers, Francesca’s Collection, and Market Eats — an upscale, commuter-positioned food court
- How this property has been reimagined: Situated on top of a bustling regional rail hub that transports more than 22 million people each year, the new Fashion District Philadelphia is just steps away from the Philadelphia Convention Center, Independence Hall, and Reading Terminal Market — attractions that draw 42 million people each year. Originally planned as an outlet center, it changed its name last year to better reflect the demand from a broad mix of uses.
Not a traditional mall, this outward-facing cityscape will be the region’s first metropolitan shopping destination that combines flagship brands and designer outlets with dining, entertainment and art experiences. This strategic leasing approach will help create a more curated retail experience for commuters, city residents and tourists — all in one convenient location.
- Location: Nashville, Tenn.
- Size: 1,141,685 sq. ft.
- Developer and owner: Owned in a joint venture between CBL Properties and TIAA-CREF
- Key tenants added in the past two years: Kings Dining & Entertainment, The Cheesecake Factory, ULTA Beauty, American Girl, H&M, Connors Steak & Seafood, Kona Grill, and Rock Creek. California Pizza Kitchen will open in 2018 and will include a bar that extends into the common area.
- How this property has been reimagined: CBL pro-actively purchased the Sears store at CoolSprings Galleria and embarked on a multi-million dollar redevelopment project. CBL transformed the former Sears building into a dining, entertainment, and experiential retail destination that includes Kings Dining & Entertainment, American Girl, Rock Creek, H&M, Kona Grill, and Connors Steak and Seafood. The redevelopment culminated with a multi-million dollar renovation of the entire property. CBL continues to evolve the tenant mix with a focus on regional boutique offerings, including Altar’d State, as well as a rotating line-up of local pop-up shops.
In late 2018, CoolSprings Galleria will welcome a new prototype California Pizza Kitchen that features a bar that extends into the common area. CBL is also evaluating the best ways to extend the customer experience in the common area by offering live music with up-and-coming Nashville singers and songwriters and through partnerships with several community organizations to host regular events.
The Shops at Willow Bend
- Location: 6121 West Park Blvd., Plano, Texas
- Size: 1,200,000 sq. ft.
- Developer and owner: Starwood Retail Partners
- Key tenants added in the past two years: Plano Children’s Theatre, Evereve, Journeys, and Francesca’s. Coming in March: Crayola Experience (one of just four in the United States).
Opening in the fall: Knife, a steakhouse by celebrity chef John Tesar, Mexican Bar Company, and Dallas favorites Terra Mediterranean and Whistle Britches. Equinox fitness center will open in late 2018.
- How this property been reimagined: It is making the transition from beloved local mall to town core. The $125 million reimagining of The Shops at Willow Bend will include new uses designed to create a true town center atmosphere for the entire family. A long-vacant anchor is being transformed into a street of chef-driven restaurants, quick-service and other eateries to serve a variety of palates. The property also will be reoriented for greater visibility from the Dallas North Tollway. An Equinox fitness center will provide personalized training and spa services to all who live and work in the area.
Perhaps the greatest change is The Shops’ focus around children and experience. Newly opened is the Plano Children’s Theatre, the flagship location for North Texas Performing Arts, offering classes, workshops and performances for youth ages 3 to 18. Also geared toward the entire family will be the Crayola Experience, one of just four in the United States, where the young and young at heart can indulge their inner artists. A luxury cinema will be announced shortly. Future plans include a 200,000-sq.-ft. Class A office building, completing the transition of this upscale mall into a mixed-use community that will serve guests and office workers from early morning until well into the evening.