VOL. 119 | NO. 34 | Friday, February 18, 2005
Retail Growth Will Continue Even After Construction
New Malls to Drive Further Retail Growth
Big-box, small stores to follow large-scale centers
The Daily News
The Metro Memphis retail landscape is about to see major change.
Over the next two years, three open-air shopping malls of various sizes and
styles will open for business in Shelby and DeSoto counties.
The new malls will deliver more than 2 million square feet
of retail space to the market. Once the centers are completed, it might seem
that the region couldnt handle much more retail growth.
Development potential. But
commercial real estate professionals said the markets potential is strong for
the foreseeable future, as the new malls will add opportunities for big-box and
small retail growth in their expanding submarkets.
A precursor to the trend was seen in 2004, when, according
to CB Richard Ellis, 1.3 million square feet of new inventory was added. Much
of that was big-box development, such as Kohls Department Store, Target, Home
Depot and Wal-Mart, which added stores throughout Shelby and DeSoto counties.
Supporting space. While
its probably safe to expect a slowdown in development of mega-retail centers following
delivery of the three open-air malls The Avenue Carriage Crossing in
Collierville and Southaven Towne Center and DeSoto Pointe in Southaven an
overall slowdown is not seen on the horizon.
What will keep going is all of the support stuff that
clusters around the main retail base, said Joel Fulmer of Boyle Investment Co.,
president of the Memphis Area Association of Realtors Commercial Council. The
area right around Wolfchase Galleria is a good example. You have Carriage
Crossing going in, and then for the next three to five years, you have the
smaller retail clusters that pop up in support of it that capitalize off the
traffic that those draw. You have little carpet stores and restaurants, the people
that are not going to go in the middle of the big development, but want to feed
off some of the traffic that will be drawn to the area.
Neighborhood retail. While
the amount of retail space in the market saw continued growth last year, that
new space was being filled. According to a CBRE fourth quarter Retail Market
View, the overall vacancy rate declined to 9.1 percent during the quarter, its
lowest level in five quarters.
New retail development in the next few years wont be centered
solely around large-scale retail development, though. Some
of those little carpet stores and restaurants Fulmer referred to will open in
smaller neighborhood centers.
Thats the stuff were going to continue to see, said
Danny Buring, broker with The Shopping Center Group Inc. Youre going to see
more and more people try to get into that business. Ive always said Wal-Mart,
Kroger, Target and Lowes all own their own real estate, so where does that put
the little guy? It puts them across the street, next door in small centers, so
youre going to see more of it.
Attracting newcomers. One
factor that could lead to a cool-off in retail development is over-saturation.
Its like picking teams for these kinds of things, Fulmer
said. Theyre all going to get these majors lined up, then
theres going to be a little bit of a cooling-off period while the dust
settles. You can only put so much out there at one time.
And that could be an issue facing developments at Germantown
and Bellevue parkways, just south of Interstate 40.
There are only so many players, and most of the majors are
already in place up there or they are spoken for, Fulmer said. There are not
as many people to pick from for that general area as there were five years ago.
Youve got 20 or 25 pretty good-sized retailers, and virtually every one of
them is already represented in that Germantown and I-40 market. For there to be
much more new activity in that area, its almost going to have to involve new
people coming into this market, rather than just people that are already here
expanding there. Thats a lot harder and a lot slower than it is pulling
Dillards to open up a new store.
Interest rates. The
fact that interest rates are expected to see small increases over the next year
or two could play a role in whether some retail developments go forward.
It will have an impact on the developers, but its not
going to have as much an impact, Buring said. Big picture, its going to have
an impact of 10 cents a foot to the retailer. As far as the developer, its
going to be nickels and dimes.
Fulmer believes projects wont halt as rates inch upward.
I dont think interest rates will jump up very fast,
Fulmer said. Weve always been able to make deals work until rates got up
around the 10, 12 percent area. Then they start getting to be more difficult, and
weve got a lot of room between here and there. So I dont think interest rates
are going to be much of an inhibitor over the next two to three years.
The Avenue Carriage Crossing
Location: Highway 385 and Houston Levee Road in Collierville
Size: 810,000 square feet
Projected opening: Fall 2005
Southaven Towne Center
Location: Interstate 55 and Goodman Road in Southaven
Size: 542,058 square feet
Projected opening: Fall 2005
Location: Interstate 55 and Church Road in Southaven
Size: 1 million square feet
Projected opening: 2006