Monday, 9 January 2012

Retail real estate poised to build on last year’s momentum

The retail real estate world in metropolitan Kansas City began its return from the wreckage of the Great Recession last year, but it’s still a bumpy road, and there may be more casualties in 2012.

That’s the word from Lane4 Property Group, which recently issued its 2012 Kansas City Retail Report, an around-the-horn review of retail development in the area. The respected development firm said it was hard to pin down when things began turning around last year, but life did return to the market, at least in most areas.

“The recovery may still be tenuous and inconsistent, but it is certainly a welcome improvement,” Lane4 reported.

Still, don’t expect much in the way of new retail development to occur, particularly around the outer edges of the area, and there are some shopping centers in nonprime locations that will probably face foreclosure in 2012. No names were mentioned.

“Many retail projects are still in precarious condition — especially those with developers that bet on continued residential growth in outlying areas or those that are not anchored by a top-tier retailer,” according to Lane4.

The underlying theme is that for quality retail developments in good locations, leasing is picking up nicely.

“The trend most identified last year, a flight to quality, is continuing apace,” Lane4 reported.

The Country Club Plaza, which got a black eye with its ill-fated foray into office development, did quite well when it focused on its core interests. Lane4 said the venerable shopping center had a “banner leasing year” attracting desirable retail tenants, including H&M, Michael Kors, Kate Spade and Sur la Table.

The restaurant scene on the Plaza was sizzling too, with new tenants including Seasons 52, Coal Vines and Gram & Dun. Lane4, which has its offices in the Plaza, also predicted a good year ahead.

Here’s a summary of the other area categories:

• Northwest Kansas City: Healthy and stable, with prospects for two large-format retailers opening in the Missouri 152 corridor this year.

• Northeast Kansas City: One of the few areas with new development. Look for a large-format retailer near Interstate 35 and Missouri 152, and additional retailers coming to the Liberty Triangle.

• South Kansas City: Ward Parkway was boosted by landing Trader Joe’s. AMC is remodeling its movie complex. Look for a Marshalls HomeGoods at the center and new retailers to go up on the site of the demolished Dillard’s.

• Southeast trade area: Steady growth. Summit Fair reduced its vacancies, and a new grocery-anchored center will open in Belton.

• East Jackson County: Lots of relocations. The Independence Center mall continues to do well, and a major large-format retailer is expected next to the Bass Pro development.

• North Johnson County: Wal-Mart’s decision to locate in Mission Gateway jumpstarts development, and construction is under way at Mission Crossing. The former Circuit City center in Merriam may be redeveloped, and Oak Park Mall remains one of the area’s strongest retail hubs.

• South Johnson County: The bankrupt Corbin Park project at 135th Street and Metcalf Avenue was bought and renamed Aspen Square. The shopping area around 119th Street and Roe Avenue remains robust with leasing up at Park Place, and One Nineteen adds Trader Joe’s, Standard Style and other upscale tenants.

• Wyandotte County: Legends has financial struggles, but it completes its transformation to an outlet format with new tenants, including Polo and Saks Off 5th. Sam’s Club will open this year at the Plaza at the Speedway. Hollywood Casino opens next month, and the 39Rainbow retail development is going up near the University of Kansas Medical Center.

The report also listed taxable sales by county, with Johnson County leading the pack with $4.4 billion in sales through the first half of 2011, up 3.5 percent from the same period the previous year.

It was followed by Jackson County, $3.9 billion, up 1.7 percent; Clay, $1.2 billion, up 1.26 percent; Wyandotte, $874 million, up 3 percent; Platte, $673 million, up 1.7 percent; Douglas, $622 million, up 1.8 percent; Cass, $426 million, down 1.2 percent; Leavenworth, $247.8 million, up 2.2 percent; and Miami, $128.4 million, up 4.5 percent.

A few trends noted by Lane4 were the downsizing of what’s called the “big box” category of stores as Internet shopping continues to grow. Also on the Internet theme, retailers will need to provide more of a fun shopping experience and personalized service to compete as more and more shoppers go online.

Managers of retail developments also are going after other types of tenants to fill space, including restaurants, medical services, fitness clubs and educational users.

Lane4 concludes that this year will continue the slow and steady improvement of 2011.

“Deals may not be fun or lucrative, but at least they happen and will likely occur with more frequency,” the report said.


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