Retail Shopping: Not Dead Yet
The International Council of Shopping Centers Spring Convention, often called RECon, was held May 21—24. The media reports of the imminent death of retail seemed lost on the 37,000 attendees. There was certainly an air of caution and considerable talk about the number of stores closing. Several retailers provided guidance that included reduced number of store openings, and others stated revised criteria for prospective locations. There is an old adage about the cream rising to the top and, to mix metaphors, dead wood needs trimming. Online retailers like Amazon are opening brick-and-mortar stores. Costco, Ulta and Big Lots are some of the merchants posting rosy results. German grocers Aldi and Lydl are opening new stores and announcing plans for hundreds more. And, outside of Miami, plans were announced for a huge new shopping center, by the developers of Mall of America, which will take the biggest-mall title away from Mall of America. This 6,000,000 square foot project is being billed as “retail-tainment.” Retail-tainment won’t be your mother’s mall from the ‘80s. That mall is gone, much like Z-cavariccis, big hair and pegged jeans. My take-away from the convention is that retail is not dead; it is in transition. In the transition there will be winners and losers. Some things make unexpected comebacks though. Ray-Ban Wayfarers, as well as terrycloth shorts and pants, were spotted poolside at the Pleasant Valley Country Club on Memorial Day. Please though, no parachute pants. Some fashions need not repeat.
Regarding retail transitions, the long-struggling Shackleford Crossings shopping center at Interstate 430 and Shackleford Road may soon have a new owner. The property is under contract to a group out of Dallas. Despite, or perhaps because of, a decade or so of significant vacancy since the property was developed, this group sees promise in the center. Of course, it will help if they are able to buy it at a price that reflects the apparent challenges in attracting tenants to the center. Maybe the future of that property includes some adjustments to mix in uses other than retail. To put it bluntly, something needs to change. What the current owners have been doing most certainly hasn’t been successful in filling the interior shop space. That “main street” type of product is hard to get right. Maybe it is time to accept that the original development didn’t get it right and try something else.
Mixing other uses in with retail seems to have worked for Westchase Plaza. The ~65,000 square foot center just off the corner of N. Shackleford and Markham Street has endured changes, including the closing of the adjoining Kroger grocery. The property sold last month for $4,500,000 (right around $69/square foot). Some of the previous owners had enough confidence in the center that they stayed in the deal and brought in some new investors to join them.
A couple of months ago, we wrote about some office buildings that might be able to accommodate a 50,000 square foot tenant. One mentioned was the downtown Little Rock Acxiom building, which has since been purchased by Simmons Bank. In the musical chairs game of Little Rock office space that fills a chair and opens a chair, this one is what is currently known as Simmons Tower. That list of possibilities also included Regions Center and the AT&T building on Capitol Avenue. Word on the street is that the AT&T building is now under contract. Maybe it is a speculative investment, maybe some company is trading chairs, or maybe we’ll get an announcement of some new jobs coming to Little Rock. Maybe the buyer is from Dallas. Seems like there’ve been a bunch of Dallas buyers lately.
WestLake Corporate Park sold last month to an investment group out of Dallas. Most observers found no surprise in the sale, or in the fact that the buyer is from Dallas. As noted above, Dallas investors seem to be comfortable with Little Rock as a suburb, maybe with an extra-long commute. The WestLake office buildings sold for a total of $45,100,000. The building area on record at the assessor’s office is just a little over 411,000 square feet. The per square foot price on those buildings works out to be within a few cents of $110 per square foot. There were a couple of undeveloped five-acre lots that are recorded to have brought $130,000 apiece, or about $3 per square foot.
One might speculate about what is considered landmark property in Little Rock trades for considerably less per square foot than property in Dallas. It is prudent for these out-of-state buyers to remember that Little Rock properties fetch less per square foot in rent as well. It appears that the group that bought Regions Center a few years back thought that if it were spiffed up, rents could be brought up. Instead what happened is that, despite the common area improvements, tenants left the building, vacancy went up and there’s litigation underway concerning bankruptcy vs. foreclosure on the property. Someone asked me last month about some of the office buildings and as to why some had such better occupancy than others. My answer, and my perspective, is that those buildings that are outperforming their peers have owners that thoughtfully reinvest in their properties with a long-term investment horizon and employ, often directly, great on-site managers.
I wrote last month about a couple of senior living proposed facilities that might or might not see zoning approvals. It seems that both of those may likely survive the gauntlet. I’ve also wondered when the apartment boom in Little Rock would bust. If a property owner at Highway 10 and Taylor Loop Road has their way, they’ll beat the bust and get another property rezoned for multi-family before the latest apartment wave subsides. There’s a 248-unit project proposed behind Buffalo Wild Wings. I’ll leave it to others like The Multifamily Group to crunch the numbers about number of units completed, under construction, occupied, etc. I do find myself wondering though, why so many of the multi-unit housing projects require rezoning? Is there not enough MF-zoned property? Did growth patterns change such that MF-zoned property is not in the areas where people prefer to live? Is it too hard, or too easy, to get property zoned for multi-unit housing? And of course, how will owners of the lowest-priced apartments continue to effectively operate and maintain those properties if demand continues to move from them? Some of those lowest-priced properties are some of the highest-crime locations.
Tips and suggestions, well most of them anyway, are appreciated. Hope you found something interesting in the column this month. Check back again next month for the things that didn’t get included here this time and that pop up between now and then.