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BIG-BOX BOOM

Hattiesburg, Miss., prepares for 1.5 million-square-foot retail bonanza

BY JILL MAUNDER

Some big-box retailers are giving a small Mississippi city some hope of economic regeneration.

Bed Bath & Beyond, Old Navy and Target are coming to Hattiesburg, Miss., leading a 1.5 million-square-foot retail construction boom that developers and city officials are looking toward to keep local dollars at home. Since 1997 this small college town has been bleeding sales taxes to larger surrounding cities such as Biloxi, Miss., and Mobile, Ala.

“You’ve heard, ‘You build it and they will come.’ That’s what’s happening to Hattiesburg right now,” said local real estate broker Andrew D. Stetelman, who also develops properties in the area.

The keystone of Hattiesburg’s retail surge is the $38 million Turtle Creek Crossing power center, scheduled for completion in November. Located on a 57-acre tract adjacent to Turtle Creek Mall, the market’s top regional enclosed center, Turtle Creek Crossing is the largest retail investment in Hattiesburg of the past decade. Big-box retailers that have been pulling shoppers out of town for years have already signed on for space in the 390,000-square-foot center. Besides Target and Bed Bath & Beyond, other tenants include a Books-A-Million, a Dress Barn and a PetsMart.

Wal-Mart has had a longstanding presence in Hattiesburg, with no less than three Supercenters, but archrival Target’s “endorsement” of the town has inspired other, more upscale retailers to take notice of the long-ignored market, observers say. The new demand is fueling a rise in a lot of other retail development, including the building of new space and the redevelopment of old. Stetelman, for example, is converting a former Kmart at one of the city’s busiest intersections into a power center. Local retailer Randy Price is developing his own small lifestyle center. An entertainment center anchored by a 14-screen cinema is also on the boards. And Best Buy is spending $1.2 million to convert an old Delchamps grocery store. The city is pitching in with tax increment financing for infrastructure and access roads.

This surge, which represents a 30 percent increase in Hattiesburg’s retail square footage, could not have come at a better time. Local retailers have not been helped much by the town’s location. Community boosters once crowed about Hattiesburg’s status as the “hub city,” with its access to four major highways. But traffic on those is two-way, of course, which means the easy access to Biloxi/Gulfport; Jackson, Miss.; Mobile; and New Orleans drained the retail traffic as shoppers hit the roads in search of big-city options and national chains. According to a University of Southern Mississippi study, the Hattiesburg trade area shrank by about 40,000 residents between 1997 and 2004. That’s sizable for just about any city, but it’s devastating for one that didn’t have that large a population to start with.

It’s easy to see why Hattiesburg shoppers are restless. The town is home to a decidedly younger demographic, with 45 percent of the population being between 20 and 44. The University of Southern Mississippi, with more than 15,000 students, is the state’s second-largest college. Hattiesburg also has a strong health care profile and sound industrial employment, with 130,000 people in its three-county metropolitan statistical area. Average household income in 2004 was $38,875 a year. The median home price was about $100,000, up 1.3 percent from 2003, while the unemployment rate was 4.1 percent.

Turtle Creek Crossing will keep these consumers from having to travel so far. “Once Turtle Creek Crossing opens, for all practical purposes it brings back the geographic areas lost in the trade area between 1997 and 2004,” said Mark Goodman, director of the University of Southern Mississippi’s Center for Community and Economic Development, which conducted the study that revealed Hattiesburg’s diminishing consumer base. “A power center has that much impact.”

Turtle Creek Crossing is a joint venture of locally based York Development, equity partner Kimco Developers (merchant building subsidiary of New Hyde Park, N.Y.-based Kimco Realty Trust), and the Seitz Group, of Dallas. York has plans to develop an adjacent tract for more retail and possibly multifamily use in the future.

Instead of feeling threatened, Hattiesburg’s existing retailers and landlords say they welcome the big boxes. The prospect of having Turtle Creek Crossing for a next-door neighbor pleases the management of CBL & Associates’ 938,000-square-foot Turtle Creek Mall, which is 95 percent leased and anchored by Dillard’s, Goody’s, JCPenney, McRae’s and Sears. “This project will keep people in town, and the 40-minutes-away rural farm shoppers will come to Hattiesburg,” said Bryan LeBlanc, general manager of Turtle Creek Mall. “The cross-traffic with Turtle Creek Mall is a win-win situation.”

Sales at the 10-year-old mall had been flat for a couple of years until last year, he says. At press time he estimated that 2004 sales would be about 4 percent higher than the year before, with annual sales averaging $313 per square foot. To stay fresh in the face of renewed competition, the mall has plans to shuffle its in-line tenant roster as leases expire, but its anchor stores will remain the same, says LeBlanc.

Locals are driving other new developments around Hattiesburg. On Hardy Street, just off Interstate 59, for example, Hattiesburg-based developer Terra Firma Corp. plans to build Chauvet Square. The centerpiece of that entertainment-oriented project will be a $12 million, 14-screen Grand cinema. The opening is targeted for July 4, says George Solomon, a principal of the family-owned, Metairie, La.-based Southern Theaters, which will operate the Grand. Comvest Properties, of Biloxi, is marketing Chauvet Square for Terra Firma, which is selling space for retail, a hotel and national-brand restaurants, says principal Nick Welch. The Hooters restaurant chain has already secured a pad. Welch calls Chauvet Square location unbeatable, because a 504-unit apartment complex is next door and the University of Southern Mississippi campus is just three blocks away.

Hattiesburg is set to get its first lifestyle center, too. Local entrepreneur Randy Price is developing the Lake Forgetful shopping center on Highway 98, across from Turtle Creek Mall. He will move his clothing shop, Price & Co., from the mall to his new center upon its completion in February.

Price is banking on the traffic-drawing ability of the new Turtle Creek Crossing, too. When he bought the property for the Lake Forgetful project, Price planned to build in two phases. But once Turtle Creek Crossing was announced, contacts from national, franchise and regional retailers prompted him to build his project in its entirety.

Price will rent to seven other retailers at about $15 per square foot, with common-area maintenance charges, taxes and insurance accounting for an additional $2.50 per square foot. He says Turtle Creek Mall rents are about $30 to $35 per square foot. Gene Carothers, a property manager at locally based Southgate Realty Co., estimates big-box rents in this market at about $14 to $22 per square foot.

Even as new properties pop up, older ones are being redeveloped into more practical uses. Stetelman’s firm, London & Stetelman, has a pending contract from a local investor group that wants to acquire a 170,000-square-foot former Kmart on Highway 98, a mile from Turtle Creek Mall. The intention is to redevelop the 23-acre site into a power center with big-box anchors and restaurant outparcels. Stetelman and local builder Dennis Pierce already teamed up to convert, expand and nearly fill another former Kmart, this one on Highway 49. Augusta, Ga.-based women’s apparel retailer Citi Trends, Memphis, Tenn.-based Fred’s Super Dollar Store and the Hattiesburg Area Association of Realtors have all signed on as tenants.

Meanwhile, Hattieburg’s oldest enclosed regional, Cloverleaf Mall, is undergoing some drastic changes to stay profitable. Charlotte, N.C.-based Hill Partners and, in recent years, the locally based Steve Floyd Properties of Hattiesburg, have repositioned the 30-year-old, 500,000-square-foot property, owned by Howard Development and the Overton A. Currie Trust of Atlanta, as a value-oriented mall with office space and a call center in its interior. Now named Cloverleaf Center, the mall’s anchors are Big Lots, Hudson’s Treasure Hunt, Stein Mart and Trees N Trends. Wal-Mart keeps an office at Cloverleaf for its Wal-Mart.com division.

All of this is why 2005 is on track to become a year of economic regeneration for Hattiesburg. “That’s what the second wind of retail is doing here, and that’s what we’ve been asking for,” said Stetelman. “Shopper retention is going to increase with the new tenants developers are bringing in.”