Shopping Center Business

MAY 2015

Shopping Center Business is the leading monthly business magazine for the retail real estate industry.

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322 • SHOPPING CENTER BUSINESS • MAY 2015 ate aftermath of the recession, some ten- ants were beginning to make deals. But the marketplace did not recover over- night: players came back into the game at different times. Power center retailers tended to respond quicker, prompting developers to capture larger acreages of land and design projects to accommodate them. Residential also came back quickly, and many large residential projects came with substantial retail plots attached or adjacent. This staggered return to the market, the trend toward bigger projects, the predomi- nance of large residential and mixed-use opportunities, and a lack of critical mass within any one segment have all contrib- uted to the growing popularity of larger hybrid retail solutions. intriguing PotentiAl The good news is these new hybrid de- velopments can work very well. Bundling large town-center-style projects, big box power center features and smaller neigh- borhood grocery-anchored components can be an effective strategy for delivering a more diverse and compelling destination. Each of these three different types of retail has traditionally operated indepen- dently, occupying their own retail niche and drawing from very different sized trade areas. This cross-pollination how- ever, allows consumers to consolidate what may have formerly been several separate shopping trips into a single ex- cursion. Instead of making a trip to the grocery store or the market, then another trip to big box retailer, and then another to a smaller independent shop to buy a gift for a friend's birthday, shoppers can make one trip — to one place — and cross everything off the to-do list. From the re- tailer's perspective, the expectation is that successfully capturing all three retail seg- ments has the potential to dramatically enhance cross-shopping opportunities. comPlicAtions And chAllenges While blurring the lines between for- merly well-defined retail development cat- egories can be a good thing, it can also generate some confusion. Each category traditionally offers separate experiences and presents a unique range of products. Different retail environments also have different development goals, perspectives and priorities with respect to shopping dy- namics, access and visibility. While big box power center retailers are outward facing and are typically con- cerned about visibility from the street, the exact opposite dynamic is at play with specialty center retailers, who are more inward facing and focused on the inter- nal project flow and experience. Logisti- cal conflicts can also present problems. Parking preferences and requirements can differ, and conflicts and restrictions can dictate what can be built, where and when. A Super Target and a grocery store will likely be mutually exclusive, for ex- ample, and whichever gets its foot in the door first can potentially have a dramatic downstream impact on the resulting ten- ant mix. Timing is also an issue. While a power center can often get up and running within a year, a town center may take sev- eral years or more to hit its stride. Accommodating the different needs of power centers, specialty and town cen- ters, and neighborhood centers can be a real challenge from a design standpoint. Leasing is also much more complicated. Because different leasing teams specialize in different tenant relationships, there has been a reshuffling of the deck in that re- spect, as well. Today, leasing teams have been more collaborative, more prone to crossing over between categories, and more likely to get involved in deals that are not in their typical comfort zone than ever before. In the face of these competing pri- orities, it is not uncommon to let short- term preferences and prerogatives drive decision-making and to give precedence to tenants who are ready and willing to move forward and make an immediate financial commitment. Developers need to exercise caution, however, not to com- promise the optimum project layout and flow that will maximize chances for long term sustainable success. Shuffling the deck and moving components around simply because a prominent tenant was aggressive early in the leasing process can be a big mistake. Located in San Jose, Costa Rica, Escazu Block 205 is a large mixed-use project featuring outdoor terrace, retail, office, cinema and restaurants. Located on Long Island, New York, Station Square is a large, transit-oriented mixed-use project featuring specialty retail, specialty grocery, office, hotel, restaurant and significant residential component.

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