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Buyers be there
Retail construction enjoys a sellers' market
By Janine Anderson
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| Photo by Brian Ebner/Optic Nerve |
The Bayshore Town Center represents more than just another shopping opportunity.
When the development reaches completion later this year, Glendale will be home to one of the hottest trends in retail construction. The project combines new buildings with some of the 50-year-old Bayshore Mall's existing structures in a 45-acre lifestyle — or town-center — concept.
The new use of old shopping space will include 1.2 million square feet of retail, restaurant, office and residential space. And outdoor public areas should draw people for reasons other than shopping.
That concept puts Bayshore squarely in line with national trends.
According to the International Council of Shopping Centers, neighborhood-based retail and open-air concepts are the most popular nationwide. Of the country’s 48,000 shopping centers, only 1,100 are enclosed shopping malls. The rest are open-air, strip malls.
And one of the most popular shopping center types is right in Glendale, with an open-air concept featuring 150,000 to 500,000 square feet of retail space. Lifestyle centers tend to attract higher-end retail tenants, entertainment venues and sit-down restaurants.
ICSC figures show about 140 lifestyle centers in operation, most of which were built in the last six years.
“That’s just where development is,” said Patrice Duker, spokeswoman for ICSC. “That’s the format that’s being built. If you look at the industry in general, almost every decade has had a development of choice.”
In the 1970s, ’80s and early ’90s, the mall was the hot design. In the 1990s, big-box stores started to appear, only to make room for lifestyle centers starting around 1998, Duker said.
“The vast majority of what construction is taking place is in the open-air format,” she said.
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| Eppstein
Uhen’s design of Starbucks Coffee is part of The Shoppes at Brookfield Commons. Images courtesy of Eppstein Uhen Architects Inc. |
Eppstein Uhen Architects Inc., Milwaukee, is the managing architect at Bayshore, which is one of the largest retail developments in the Milwaukee area. And John Monefeldt, Eppstein Uhen’s senior project architect, said local trends are simply following the national ones.
“The lifestyle centers, there’s a huge amount of growth in that area,” Monefeldt said. “It’s not something as simple as a mall. It’s more complex, where people can go for restaurants, business needs. There are offices there, and you have residential within walking distance.
“It’s everything wrapped up into one.”
And the new style, he said, is tied to an increase in local retail development.
“It definitely is taking off from where it was four or five years ago,” he said. “With the whole 9/11 thing, retail and a lot of other commercial development leveled off and dropped off. We’re seeing a resurgence — in retail especially.”
Retailers’ desire to have a new way to bring products to market is contributing to the strength of the industry.
“A lot more retailers are looking at having a stand-alone facility rather than being in a mall,” Monefeldt said. “They feel it brings more attention to what they’re selling.
“Walgreens is a good example of that. They used to be located in a strip-mall center, but now they’re almost always built on an out lot.”
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| Eppstein
Uhen’s design for this Whole Foods Market at Hilldale Shopping Center in Madison
is under city scrutiny. Image courtesy of Eppstein Uhen Architects Inc. |
But even with the increased popularity of stand-alone stores, strip malls continue to be popular because of their usefulness, said Duker.
“The general public understands the concept of strip centers,” she said. “Those strip centers and neighborhood centers, you see them get built more aggressively because of what tenants they have and who they draw from.”
Strip malls tend to draw customers who live within five miles of the center, making the malls popular for grocery stores, discount department stores, card stores, drug stores and dry cleaners. They provide convenient goods and services close enough to make daily trips if necessary.
The luxury market also is doing well, with chains like Neiman Marcus, Nordstrom, Williams-Sonoma and Anthropologie expanding. The higher-end market follows income levels, and as an area’s demographics change, the kinds of stores filling shopping centers change too.
“Centers have to be
representative of demographic switches,” Duker said. “You’re seeing
retailers entering different markets, looking at secondary or tertiary markets.
“They’re seeing there’s growth there, and, in some cases, they’ve
hit all the primary areas they want. So to grow, they’re looking at other
areas.”
Bob Barker, executive vice president of the Associated General Contractors of Wisconsin, said the state seems to be on track with national retail tendencies.
“I think the trends in retail are following the population trend,” he said. “Where you see new residential, you see new retail. The kind of residential determines the kind of retail.”
A multitenant retirement community might attract a strip mall with many stores that are easily accessible, he said, while high-growth population centers might see new big-box stores coming in.
Local contacts offer national contracts Thinking about trying to break into the national retail construction industry? It's not always easy, but it can be worth the effort. John Monefeldt, senior project architect with Eppstein Uhen Architects Inc., Milwaukee, said national relationships often start close to home. Eppstein Uhen works with national chains such as Sears, Whole Foods Market, Applebee's, Taco Bell, T.J. Maxx and Jewel-Osco. "A lot of times, that starts off as simple as an architect working with a local developer who is bringing in a national chain," Monefeldt said. "If we were working with a developer who was working with Starbucks, we'd try to develop that relationship so that if we hadn't done something for them, we could." Building those relationships can take time, but without them it can be difficult to land the national clients. "A lot of the time, the national clients will go with people they've worked with before," Monefeldt said. "Once the relationship is built, it can usually lead to more." Bob Barker, executive vice president of the Associated General Contractors of Wisconsin, said the nation's largest chains, like The Home Depot and Wal-Mart, have a qualification process for hopeful contractors, he said. There are forms to fill out and financial information to disclose before a company can even be put on the bid list. "The big stores can be very difficult to work for," Barker said. "They're big, and they call the shots." But despite the difficulties, people find it worth their while, he said. "We have members that follow companies around the Midwest," Barker said. "Once you understand them and they understand you, you learn how you might be able to make money on their projects." For someone interested in getting into the national retail construction business, Barker said, it takes effort but is not limited to the largest firms. He said many AGC member firms that work in national retail fall somewhere in the middle, though they must have the financial capability to bond a large project. Just as the size of retail projects varies, so does their type, which can contribute to the difficulty of working in retail construction. "Retail can be a fickle creature due to the fact that it's not as easy as it may look from the outside," Monefeldt said. "It can be kind of a nebulous or scary thing." - Janine Anderson |
The Madison-Milwaukee corridor continues to be a strong place for growth, Barker said, with much of the new retail entering the suburbs and exurbs of the two metropolitan centers.
“Over the last few years, as residential construction booms, you see that draws big-box and other retail out to that area,” he said. “It doesn’t take long for retail to find out where the population is going.”
If the population exists, and the infrastructure is in place to support retail, development is likely within a few years of the residential growth, he said.
The trends Barker identified at the local level are playing out nationally, with retail construction on an upswing following a strong residential construction market.
Increased consumer confidence is helping the retail sector recover from a recent economic downturn, and with more people than ever owning homes, retailers have new markets to consider.
Mixed into that trend is a rise in construction employment nationwide, said Ken Simonson, chief economist for the Associated General Contractors of America. In fact, overall construction employment is rising two to three times the rate of employment for all industries.
“This is generally a positive sound for nonresidential construction,” he said. “Retail generally goes with population expansion, but it’s not a perfect correlation by any means.
“You do have areas that are growing relatively slowly, but if income is moving up, you’re likely to get some retail expansion.”
Some city neighborhoods might not see a net gain in population, but that can be balanced with construction of mixed-use and luxury housing, Simonson said.
“Chances are you’ll also see a pick up in retail activity in those areas,” he said.
U.S. Census Bureau figures show strong growth in multi-retail, general merchandise, shopping centers and shopping malls, he said, up from a low point a year ago.
Simonson said he’s optimistic retail will continue to expand, but he balanced that optimism with caution over rising prices in other areas.
“I think one warning sign is that material costs are increasing at a much higher rate than the overall rate of inflation,” he said. “That could cause some retailers to curtail their expansion plans.”