Parks To Potholes
Each May about 30,000 or more people associated with, or interested in, retail real estate converge on the Las Vegas Convention Center for the retail real estate convention (RECon) hosted by the International Council of Shopping Centers (ICSC). Overall attendance is still below the highs seen preceding the real estate downturn accompanying the Great Recession. However, RECon occupied over 835,000 square feet of floor area in three buildings this year. And ICSC reported that there were 1,265 exhibitors at the show, the most since the Great Recession. Cities, towns, counties and economic development groups added many of the new participants. One of those was Fayetteville, Ark. Devin Howland, director of the city’s Economic Vitality Department was there and stated, “Retail plays a big part in building a sense of place.” Howland also noted that developers are coming to Fayetteville’s Uptown District, on the north side of town and, on the south end, the Walton Family Foundation has provided $120 million to build a new University of Arkansas art school that is expected to help fuel retail development. My friend Rex Nelson, and others, keep noting Northwest Arkansas growth is driving much of the Arkansas economy. Some people attribute, or blame, much of that on the Walmart effect. I suggest to you that it is more than that. As an interested observer, it appears to me that much of it has to do with focused efforts and a spirit of cooperation.
Other news from around the convention included observations from Jones Lang LaSalle that retail real estate is experiencing a buyer’s market and the pace of transactions is expected to rise in the near term. I see examples of that being the case near to Little Rock. Several properties have recently sold, are under contract, or are being offered. Conversely, there are some properties that really could use new owners with fresh perspectives. Many of these properties are not being offered and offers to purchase them have been greeted with indifference. The whole community suffers when properties are derelict. Shopping Centers Today aggregated comments from lenders participating in RECon and noted that there seems to be nearly unlimited capital looking for deals. Perhaps some of this capital can convince some of the indifferent owners to trade properties, or even to cash out.
While the news seems to be dominated by the supposed death of malls and high-profile closures of national retailers, there are dozens of retailers opening hundreds of stores this year and next. CoStar Research Director Suzanne Mulvee noted that while many people look at the changes in the retail market and attribute it online shopping, it is really much more than that. Her observations included that more foundational issues include oversupply, changing demographics and weathering the worst recession since the Great Depression. Those that blame all the woes of failing retailers on Amazon and others have apparently overlooked, or chosen not to see, the fact that online shopping is still a fraction of the aggregate retail sales. There will be more store closings. Some are needed. Look at Sears and K-Mart. Many of those stores haven’t seen any capital investment since the 1970s. See my note above about derelict properties. The same holds true for zombie stores. There will be more store openings. There will be more retailers that are “right-sizing” and some of the retail inventory will become other uses. A local example is in North Little Rock where PetSmart moved across the parking lot to a store half the size of the original and Ortho Arkansas opened a state-of-the art orthopedic clinic in the former PetSmart space. Some “etailers” are becoming retailers with real-life brick-and-mortar stores. Examples abound, including Amazon’s purchase of Whole Foods. If the future of retail is all cloud-based, why would Jeff Bezos buy a grocery store chain?
In local happenings, Mexico Chiquito at 13924 Cantrell Road has closed, AND the property has sold for the tidy sum of $1,550,000. Anchor Realty Investments bought the 1.67-acre property, including a 3,280 square foot building. Anchor is led by David Alan Bubbas of David’s Burgers fame & fortune. I figure the odds are 1-1 on a David’s Burger cropping up on the site. In other random events, the 5,500 square foot building formerly housing Vesuvio Bistro nee El Chico sitting on 1.36 acres at 1315 Breckenridge Drive sold for $650,000. An address namesake LLC bought the property after the City of Little Rock approved the property to be used as a private club. An entity by the name of CVS 10975 AR LLC paid $2,250,000 (yes, over two million dollars) for the northeast corner of McCain Blvd. and North Hills Blvd. There is an Exxon-branded convenience store there today. Watch for it to vanish quickly so as to be replaced by a CVS Pharmacy. So, despite the improvements and the operating business, this is a land sale. As such, the 0.92-acre site sold for an impressive (for Arkansas anyway) $56 per square foot, or almost $2.5 million per acre. After factoring in the costs of demolition, disposal and remediation (if needed) the all-in land cost is sure to be considerably more.
On the subject of high land costs and coming back around to news from RECon and to the south side of the river, sources tell me that the developers of soon-to-be The District at Midtown had a good show with strong interest from many new-to-market and high-profile restaurants. Most, if not all, of the project consists of ground leases and maybe build-to-suit opportunities that are valued similarly to the CVS site in North Little Rock. We might file this in the if-you-have-to-ask-you-can’t-afford-it category. It will likely be fall before there’s any meaningful demolition or construction on the site. There are still some approvals to be garnered before commencing work on the site. Keep an eye on it though, and when there’s news I can share, I will.
I’m fortunate to get to hang around in the company of many smart, thoughtful and civic-minded people. Some of those people circulated an email of issues important enough to ask the mayoral candidates about. One of those issues was real estate development. I added to the string with a note that it is my observation that the conversation needs to be focused more on economic development vs. real estate development. Without job growth, there’s very limited need for real estate growth. Little Rock cannot continue to rely on growth of government and schools to provide job growth. There needs to be focus on the growth of private-sector jobs that raise the average incomes of Arkansans. Economic development will ultimately yield real estate development and, perhaps more importantly, redevelopment. And, while I’m editorializing, without addressing public schools, public safety and public works (parks to potholes), there will continue to be limited, paltry even, population growth in Little Rock. For decades, the woes of Little Rock have been the greatest population driver of the surrounding communities. Make no mistake, I support the economic health and vibrancy of all of Central Arkansas – the entire state, actually. Little Rock’s success, or failure, profoundly affects the economic development of the entire region. Companies considering growth in Central Arkansas, companies considering Central Arkansas for new locations, for addition of employees, for capital investment, consider quality of life. They consider the health and vibrancy of the entire community, of all the communities. For all too long, that vibrancy has been more evident in surrounding communities and in a couple of neighborhoods, rather than in Little Rock as a whole community. Little Rock must invest public schools (I know LRSD isn’t the City, that doesn’t mean nothing can be done), must invest in public safety, must invest in public works (time to change the funding system) must invest in people, must invest across the entire city—not just downtown. The next Mayor of Little Rock needs the ability to make changes, AND to recognize that change is needed if the capitol city is going to be a leader in Arkansas’s future, not just a historic city.
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.