Market-Driven

Retail Projects are Abundant Throughout Region

By Debra Wood

Favorable economic factors and population growth are spurring retailers and developers to add inventory and, in turn, creating opportunities for contractors to build new stores and shopping and lifestyle centers.

"We're experiencing one of our better years ever," said Dale E. Scott, vice president of Keene Construction Co. of Maitland, Fla., which specializes in retail projects. "Last year was excellent, and this year is even better."

Scott said a slowdown in retail work after Sept. 11 continued through 2003, but projects placed on hold started coming online in 2004.

"There's a little bit of pent-up demand," he said. "Interest rates and capitalization rates are unbelievably good now, and people are trying to get product built. Those interest and cap rates are not going to stay where they are forever."

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Capitalization rates reflect the return on investment and are generally expressed as a percent of the net rental or operating income divided by the project's sales price.

Patrice Duker, spokesperson for the International Council of Shopping Centers, a global trade association of the shopping center industry with offices in New York, said multiple factors contribute to the current robust retail market, including a general improvement in the economy. Many high-end retailers are entering the Southeast market due to income growth in the region.

"The South, in general, has been strong because you have residential growth," Duker said. "People are more aggressive in building because more capital is available. And interest rates are still low."

Following the Growth

Grocery-anchored strip shopping centers follow the addition of residential subdivisions. For instance, Hawkins Construction of Tarpon Springs, Fla., is building a Publix-anchored shopping center in rapidly growing Port Charlotte, Fla., for developer Alliant Partners of Tampa.

Sometimes, the developer incorporates these convenience centers into planned communities, such as at Midtown Plantation District in Plantation, Fla. Publix will anchor the 45,000-sq.-ft. shopping center in the mixed-use development by WestCity Partners of Boca Raton, Fla. The same developer broke ground last fall on Weston Commons, another mixed-use project with a grocery-anchored retail component.

David Marks, president of Marketplace Advisers, a retail-consulting firm in Orlando, said the grocery segment is not as strong as other types of retail, due to consolidation in the industry. But Publix continues to build, as do Wal-Mart Supercenters and SuperTarget, which combine discount general merchandising with groceries.

Batson-Cook Construction Co. of Jacksonville recently completed its 53rd Target or SuperTarget store and has three Atlanta Targets under construction. It began working with the retailer in 1991. Target Corp. is planning 100 new stores annually, until it reaches 2,010 in 2010.

"There are plenty of opportunities for Target as well as others such as Lowe's, Wal-Mart, Home Depot and Kohl's," said David A. Barksdale, senior vice president and general manager of Batson-Cook's Jacksonville office.

Kohl's Corp. said the company plans 33 new stores nationwide by yearend. Kohl's spokesperson Lori Sansoucie said locations in the Southeast include Orlando and Jacksonville in Florida; Macon, Ga.; Asheville, N.C.; and other sites in Georgia and the Carolinas. The retailer, which operates in 40 states, has previously not had a presence in Florida.

The Sembler Co. of St. Petersburg has announced a Kohl's project in Clermont, Fla., which it plans to open this fall.

Lifestyle Centers

Keene currently is building The Loop, a 440,000-sq.-ft. shopping and entertainment village in Kissimmee, Fla., for The Wilder Cos. of Boston. The Loop's announced tenants include Kohl's. The lifestyle-type center on the outskirts of Orlando seems typical of the shopping-center style now popular.

"Lifestyle centers are hybrids - neighborhood centers, community centers, town centers and power centers all combined," Marks said. "They are well-located to capture a lot of expenditures in the area."

This retail style incorporates entertainment and dining options in the tenant mix. VCC of Atlanta serves as construction manager for The District, the $COST entertainment and retail complex at Atlantic Station in Atlanta. This portion of the brownfield redevelopment project will contain 1.5 million sq. ft. filled with a Publix grocery, Dillard's department store, IKEA home decor store, movie theater, sports bar and other tenants.

Many lifestyle centers contain big-box retailers, but they also house clothing shops and other establishments. Some centers include office space on the second floor, necessitating rooftop equipment and elevators.

"Once you start mixing uses and going to multilevels, the costs are surprising," Keene Construction's Scott said. "It sounds like a great idea, until you see how much it costs. That's one reason these things take so long to get going. You have to figure out how to make them work economically."

Many of these open-air centers locate near regional malls, such as the MarketPlace at Seminole Towne Center in Sanford, Fla. North American Properties of Fort Myers, Fla., built this 500,000-sq.-ft. shopping development across from a regional mall.

In planning its major enclosed Northlake Mall in Charlotte, Taubman Centers of Bloomfield Hills, Mich., set aside land for a complementary lifestyle center. Work is progressing on the mall but nothing is announced yet for the adjacent open-air complex, which will be connected to the mall with a pedestrian-friendly walkway.

"The outdoor component, which we're pursuing now, we think will add to the uniqueness of what we've done," said Rod Blake, Taubman development manager. "It's a hybrid. It allows us to add the outdoor, the enclosed, plus the peripheral property."

Blake said that because of their design, lifestyle centers offer lower occupancy costs and may require less land. Edward Kobel, president of DeBartolo Development of Tampa, agreed about the lower costs, but said the enticement is more than just financial. Lifestyle centers are more customer friendly and reminiscent of old times, he said.

"It feels good," Kobel added. "We are looking at doing it systematically on a research-driven model."

DeBartolo has multiple projects under way in the Southeast. In Raleigh, N.C., the company is building Perry Creek Commons, a 400,000-sq.-ft. project with big box and local retailers. It also has a project under way Tuscany Village in Clermont, Fla., and Gateway Center in Daytona Beach, Fla., both anchored by movie theaters.

To stay competitive, some regional malls have begun upgrading their facilities. Cumberland Mall in the Atlanta area has announced a major expansion and renovation.

Kobel describes the Southeast retail market as strong, driven by population growth. He cited 1,000 new residents moving into Florida every day and North Carolina's top-10 population growth rate as examples of what is driving business.

Useful sources:
DeBartolo Development LLC
http://www.debartolodevelopment.com/

International Council of Shopping Centers
http://www.icsc.org/

Retail Construction Magazine
http://retailconstructionmag.com/default.asp

The Sembler Co.
http://www.sembler.com/underDevelopment.php