Shopping Centers Today is the news magazine of the International Council of Shopping Centers (ICSC)
Issue link: https://sct.epubxp.com/i/448937
and new concepts are emerging and even breeding other concepts." Expanding retailers are filling many boxes, and other sites are leasing out to nonretail uses: medical offices, day-care centers and various types of entertainment concepts, such as trampoline centers, and even interior skydiving facilities that use wind tun- nels to simulate the experience. Some box spaces are split between retail and office tenants, such as in Royal Oak, Mich. where a former two-story Barnes & Noble downtown was divided into a second-floor headquarters for soft- ware firm Vectorform and a ground- floor space for Buffalo Wild Wings. Another two-story Barnes & Noble, at Sundance Square, in downtown Fort Worth, Texas, was partially filled by a ground-floor Cheesecake Factory that opened in December. In New Jersey nearly all the qual- ity vacant box spaces have become reoccupied, says Chuck Lanyard, president of the Paramus, N.J.– based Goldstein Group. "It's a big difference from just a year and a half ago," he said. Such retailers as HomeGoods, Marshalls and T.J.Maxx and exercise chains like Crunch and LA Fitness are filling many mid- size boxes, while the likes of Floor & Decor, Hobby Lobby, Price Rite, Wegmans and Whole Foods are filling larger ones, Lanyard says. "We're also seeing myriad entertainment uses, like gymnastics and indoor swimming and trampoline centers, but not as many churches," Caruso said. "That surge was three to five years ago." Landlords and investors who once balked at leasing to medical users are now welcoming them, Caruso says. "They don't see them as a detriment," he said. "The outpatient medical busi- ness is a $10 billion industry, and we're only scratching the surface." Urgent care, orthodontics, satellite hospitals and MRI and oncology centers are ex- panding aggressively into midsize big boxes. "Those are great credit groups, and that makes them attractive to land- lords, who can put together 5- or 10- year deals and limit downside risks." Economic indicators continue to show promise for the sector, says Raymond Cirz, chairman and se- nior managing director of New York City–based Integra Realty Resources, which performs real estate valuations. One well-located northern New Jer- sey power center that lost its anchors — namely, Borders, Linens 'n Things and Old Navy — sat vacant for years until last fall, when DSW Designer Shoe Warehouse, Nordstrom Rack and T.J.Maxx signed on in quick succession, Cirz says. Big-box rents, which were at about $22 per square foot in parts of New Jersey before the recession, have recovered to the up- per teens, he says. Conversely, power center cap rates, which have declined from nearly 7.4 percent in 2009 to about 6 percent now, offset those lower rents for owners, he says. One of the best illustrations of the sector's improved vitals is the Phoenix market. One of the three hardest-hit regions in the recession, the Phoenix area suffered 12 consecu- tive quarters of both negative absorp- tion and rising vacancy rates, with such big-box sellers as Circuit City, Linens 'n Things and Mervyns all cratering, observes Dave Cheatham, managing principal of Phoenix-based Velocity Retail Group: "At one point there were 250 available boxes." The number continues to fall, from 168 in mid-2011 to 113 in mid-2014, with fewer than 100 being projected for this year, according to CBRE. Many buildings have been taken over by some of the aforementioned uncon- ventional users, which have discov- ered how much cheaper it is to retro- fit an existing space than it is to build a new one, Cheatham says. Numerous boxes in Arizona have been reborn as schools, including a former Albertsons in Gilbert, which was split into two floors housing the Leading Edge Academy charter school, and an old Smitty's supermarket in Chandler that has become the 700-stu- dent Chandler Preparatory Academy. This school, which says it bought and renovated the property for about $100 per square foot — half what it might cost to build from scratch — also dug up the parking lot to create athletic fields. Additionally, a former Smith's Food & Drug site in Mesa now serves as Guerrero Elementary School, while an old Osco drugstore in Chandler has become the East Valley Jewish Community Center's school. Some boxes are becoming show- rooms. In Glendale, Ariz., an old Lucky supermarket has been taken over by Stardust Building Supplies, a nonprofit that promotes the reuse of building materials and house- wares. And the sparsely occupied, 173,000-square-foot Peoria (Ariz.) Town Center, once home to Walmart and Albertsons, became the property of State Trailer Supply, a distributor of recreational-vehicle accessories. Star- dust will use 60,000 square feet of the facility as a superstore-showroom and has plans to lease out the rest. In Mesa, 40 S C T / F e b r u a r y 2 0 1 5 Expanding retailers are filling many boxes, and other sites are leasing out to nonretail uses: medical offices, day- care centers and entertainment.