Creativity is key to leasing hard-to-fill space, panel says
Publish Date: August 30, 2013
The book on how to refill retail vacancies continues to take creative, ground-breaking plot twists that often defy long-held conventions, said panelists at Wednesday’s SCTLive panel discussion, in Dallas, titled “Solutions for Hard-to-Fill Spaces.” A trampoline play park, for example, has given a bounce to a pair of dark grocery spaces in the Dallas metro; colleges and ambulatory-care facilities have brought life to mall spaces; and tattoo parlors and other businesses once thought unbefitting of prime retail space are now making their mark at your neighborhood shopping hub.
Dinner cinemas, bowling alleys, museums and other entertainment businesses continue to be popular space fillers, noted Christopher Gibbons, director of project leasing at Dallas-based Venture Commercial Real Estate. Jumpstreet, an indoor trampoline center, settled into some former Albertsons spaces in Dallas and Plano, he said. Meanwhile, service businesses are rapidly replacing traditional stores in in-line spaces, said Steve Zimmerman, managing director of the Dallas-based Retail Connection. In some centers, service businesses constitute at least 70 percent of the tenants now, said Zimmerman. “That’s where the margin is.”
And as the landscape changes, department stores and other tenants with significant contractual clout are slowly becoming more flexible in approving unconventional co-tenants, Zimmerman said. “But they still need to know what’s coming in,” he said.
The industry must be quick to adapt, said Joseph Coradino, CEO of Philadelphia-based Pennsylvania Real Estate Investment Trust. “Our business is about creativity and innovation,” he said. “And we are clearly seeing a metamorphosis.” PREIT’s New River Valley Mall, in Christianburg, Va., is now home to a state-of-the-art STEM (science, technology, engineering and math) center for New River Valley Community College, Coradino said. Two other PREIT centers have made deals with ambulatory-care tenants of about 25,000 square feet each, he said.
Coradino said PREIT’s centers typically attract the second- or third-most successful medical operators in each region, as they seek to move up in the ranks. “They want to promote their brand and get an exclusive location,” he said. The medical community, at one time relegated to specially zoned business parks, desperately wants to become more visible, said Robert Young, managing director of the Dallas-based Weitzman Group. “They want to be street-side, like retail.”
In many cases, high-profile medical tenants will pay as much per square foot as their retailer predecessors for the opportunity to occupy high-profile spaces, if not more, according to Zimmerman. “It’s all about traffic,” he said. To make waits more pleasant, some medical tenants issue pagers to patients so they can shop as they pass the time, he noted.
Many of the nation’s long-vacant, aging neighborhood centers are getting repurposed as venues for trade schools, churches and call centers, or, in many instances, are being torn down for new ground-up service and retail opportunities, said Brian Murphy, managing principal of Dallas-based Edge Realty Partners.
But the next wave of adaptive re-users may well emerge from the retail pool — at least in Texas — where such influential businesses as Nebraska Furniture and Winco are moving into the market and taking some previously hard-to-lease spaces, said Texan panelists. Nationally, an influx of foreign chains such as Canada's Garage and Japan's Uniqlo are ramping up expansion plans and boosting overall demand, Coradino said.
Nonretail tenant uses that were considered to be crossing the line some 20 years ago are perfectly acceptable in shopping centers now, said Young. “Just when you think you know the market, you don’t know it,” he said. “The lesson is: You’d better be flexible.”