Demand for retail exceeds supply in Little Rock as the overall retail climate is healthy, strong and in a growth phase. Little Rock is seeing local investors, broadening portfolios, fewer big box retailers, repositioning within the market and growing interest from national tenants and restaurants. Just like cities that are larger in size than Little Rock, it is experiencing the development of several mixed-use and lifestyle retail projects ranging in size from 300,000 to 800,000 square feet.

“The shopping centers consist of local, regional and national retailers, restaurants and entertainment venues,” says Amy Allison, a retail specialist for The Hathaway Group – TCN Worldwide in Little Rock. “In addition, though, local developers continue to build small, neighborhood strip centers because small- to mid-size retailers are demanding new developments; and there is continued strong demand for restaurant sites.”

“The rates for new developments are increasing due to new national retailers’ acceptance of the higher prices thus filtering to local retailers,” Allison says.

At the highest-end shopping centers, triple net lease rates range from $25 to $40 per square foot for in-line parcels and $20 to $30 per square foot for outparcels. According to The Hathaway Group, ground leases for outparcels of 1 to 2 acres range from $80,000 to $145,000 annually for a base term of 20 years with 10 to 15 percent escalators every 5 years.

“Investors are interested in neighborhood centers that are less than 5 years old and are at least 50 percent occupied with national tenants because major properties are not being offered for sale and there is currently no new REIT activity in Little Rock,” Allison says.

The one major retail sale that did occur in Arkansas recently was of the Northwest Arkansas Mall in Fayetteville. It was sold by The Macerich Company as part of a portfolio that included Citadel Mall in Colorado Springs, Colorado, and Crossroads Mall in Oklahoma City, Oklahoma. Midwest Mall Properties, formed by three Arkansas investors, purchased the mall portfolio for more than $400 million. Northwest Arkansas Mall is an 820,000-square-foot enclosed mall that is now competing with the recently opened Pinnacle Hills Promenade in Rogers, Arkansas, as northwest Arkansas’ pre-eminent shopping center.

As for Little Rock, the two largest retail projects that are underway are Shackleford Crossing and The Promenade at Chenal. Shackleford Crossing is located at Interstate 430 and Shackleford Road. It is a mixed-use development containing approximately 585,000 square feet of retail space and 200,000 square feet of office space. The shopping center will open in phases beginning this fall. Shackleford Crossing’s tenant mix includes Wal-Mart, JC Penney, Babies “R” Us and Cracker Barrel.

The Promenade at Chenal is a 340,000-square-foot upscale, open-air lifestyle center located in Chenal Valley in west Little Rock. Being developed by RED Development, it is expected to open in spring 2008. Pricing for The Promenade at Chenal as well as Shackleford Crossing ranges from $20 to $40 per square foot.

“These two projects are unique to Little Rock due to their size, design and tenant mix,” Allison says. “They bring new retailers and restaurants to the market by creating synergy and activity in clusters, which gives retailers confidence that they will be successful in a comparably small market.”

Little Rock expects some of these new developments to experience high vacancy rates in the next year, which will soften the retail market for the next 16 to 18 months as demand catches up and rents moderate. “There will be some shake out of saturated retail segments as locals compete with new national retailers in the market,” Allison says. 

—  Daniel Beaird


Kennesaw Farms in Nashville, Tennessee.

With retail vacancy rates dropping from 4.5 percent in 2005 to 4.2 percent in 2006, Nashville is primed to be a retail destination in the Southeast. Always lauded as a great place to work, live and raise a family, Nashville is turning those positives into success for retailers. Much like Tampa, Florida, Nashville’s population has grown tremendously in recent years, up 11 percent since 2000. To meet the rising population demands, Nashville has five regional malls and approximately 69 million square feet of retail space.

Overall retail development continues to be active across the region including emphasis in Rutherford, Sumner and Wilson counties. Davidson County remains active with urban, mixed-use projects in the planning stages. Regional developers like Parker Grass Company, GBT Realty, H.G. Hill, Alex S. Palmer & Company, and Newton Oldacre McDonald are active in Nashville’s retail developments. But, the region has also gained the attention of national developers such as South Carolina-based Carolina Holdings, North Carolina-based Crosland and The Barclay Group of Florida.

Carolina Holdings and Crosland opened Providence Marketplace in Mount Juliet, Tennessee, last August. The 700,000-square-foot development includes Target, Kroger, Belk, JC Penney, Best Buy, Old Navy and a 14-screen movie theater. It serves as a gateway to the Providence community, a 1,000-acre residential development.

Newton Oldacre McDonald broke ground on the 800,000-square-foot Nashville West in early 2006, and Phases I and II are complete with openings of Target, Dick’s Sporting Goods, Costco, TJ Maxx and Ross Dress For Less. Built in west Nashville along Charlotte Pike and Interstate 40, Nashville West takes up a large tract of land in an area that is tough to accommodate such a large project.

“Nashville is a difficult market to develop in given tight zoning and topography,” says Allen McDonald, principal owner of Baker Storey McDonald Properties. “Both Providence Marketplace and Nashville West allowed for centers to be built for retailers with a multi-store strategy in mind. In addition, both centers bring a true lifestyle center concept that combines traditional retailers and upscale shopping opportunities.”

While investors are seeking retail across the board in Nashville, most of the new product built has been power centers and lifestyle centers. Urban, mixed-use projects with some retail space are also popular in heavily populated corridors. Some of Nashville’s other retail developments include H.G. Hill Company’s Hill Center in Green Hills; Glenbrook Centre in Hendersonville; Cousins Properties and Faison Enterprises’ The Avenue in Murfreesboro; Alex Palmer’s West End Summit in the West End/Vanderbilt corridor; The Streets at Indian Lake in Hendersonville; Kennesaw Farms in Gallatin; McEwen in Cool Springs; Tollgate Village in Williamson County; and Crossings of Spring Hill in Spring Hill.

West End Summit is a 900,000-square-foot development that will include high-end retail, office, residential units and the Intercontinental Hotel in the heart of the West End/Vanderbilt corridor. “Alex Palmer’s West End Summit should be a sign of things to come for the downtown area as urban renewal attracts residents,” says Peggy Sells, the retail division leader for Colliers Turley Martin Tucker’s regional office in Nashville. “As this movement gains traction, expect more retail to follow to serve residents filling a wealth of homes, condominiums and penthouses coming out of the ground.”

The Avenue is a 400-acre master-planned community in Murfreesboro developed by Cousins Properties and Faison Enterprises. It will include 800,000 square feet of retail space. With 65 percent of its space pre-leased, anchor tenants will include Best Buy, Dick’s Sporting Goods, Barnes & Noble, Belk, New York & Co., Ann Taylor Loft, Talbot’s and Cost Plus World Market.

With all of these power centers, lifestyle centers and large mixed-use developments being developed, one might think that there is little room left for smaller retail developments. However, smaller, well-positioned centers continue to sell at premium pricing levels in growth corridors. But, according to McDonald, institutional capital continues to lay a stake in Nashville but few institutional-type centers trade hands, and the opportunity to gain a foothold remains difficult.

With 100 Oaks Mall closing at the end of 2006, it represents a good opportunity to reposition a piece of real estate. “It’s in the dead center of Nashville,” McDonald says. “It’s an exceptional opportunity.”

Meanwhile, Williamson Square is facing the same opportunity. “Williamson Square is located in Williamson County, which is the wealthiest, fastest growing county in the state,” McDonald says. “This is an opportunity to reposition in a very tight market.”

Much like other cities of its size in the Southeast, Nashville is primed for retail development across the board from urban, mixed-use centers to retail development that stretches outside the city borders. Many national developers and retailers have taken notice and are strategically entering Nashville. Retailers are entering the market with more than one store, which is a positive of sign of things to come for Nashville’s retail market. 

— Daniel Beaird


The majority of Tampa retail is built out in Hillsborough and Pinellas counties. The steady population growth and employment growth in the city has positioned this saturated retail market to post outstanding numbers in 2007. Vacancy rates will check in at less than 5 percent as retailers establish locations in mature areas, like Hillsborough and Pinellas counties, as well as emerging retail sectors in the metropolitan Tampa area.

As with most cities with the size and growth rate of Tampa, the present trend for retail development is lifestyle retail or general retail with some lifestyle components. Retail is also being used with office and residential space in mixed-use developments. As retail has mostly been built out in Hillsborough and Pinellas counties, the majority of development is taking place within the jurisdictions north of Tampa such as Pasco, Hernando and Citrus counties. Wesley Chapel in Pasco County is seeing an enormous amount of retail growth, especially with the addition of ECHO Real Estate’s Grove at Wesley Chapel, a specialty retail, restaurant and entertainment complex that is expected to open this fall.

“Within the land-scarce central area, developers have become more creative in planning vertical and mixed-use centers,” says Patrick Duffy, president of Colliers Arnold Commercial Real Estate Services. “Urban infill locations are utilizing structured parking, retail over parking, retail over retail with split level parking fields and vaulted retention to increase density and deal with the high cost of land and short supply in these urban areas.”  

With so little space available inside Tampa and Pinellas County, these mixed-use developments are becoming more popular. For example, in Pinellas County, the Crossroads Mall, located at Roosevelt Boulevard and U.S. Highway 19, has been razed and a high-density, mixed-use, lifestyle center is in the late planning stages.

This variety of retail development is attracting even international retailers as Swedish retailer IKEA has announced plans to enter the Tampa market in 2009. The home furniture retailer will build a 353,000-square-foot store on the east side of downtown Tampa. Pending city approvals for the store and infrastructure improvements, the construction of IKEA Tampa could begin as early as spring 2008 with an opening as early as summer 2009. Bordered by 22nd and 26th streets, Adamo Drive and the Crosstown Expressway, the proposed IKEA Tampa would be built on 29 acres currently occupied by buildings at the former Tampa International Center.

“Unachored retail strips measuring 10,000 to 20,000 square feet at hard corners or shadow-anchored strips continue to be a preference among developers as the anchor tenants have negotiated most of the profit out of their portion of traditional anchored centers,” Duffy says.

The strong job and population growth numbers posted by the Tampa region during the past 5 years, and projections for more of the same, have most national retailers focused on entering or expanding their presence in the market. Most retailers report sales figures in Tampa that are above their national average.

As mentioned before, ECHO Real Estate has broken ground on the Grove at Wesley Chapel in Pasco County. The 800,000-square-foot site will be built out in three phases and is expected to be complete in summer 2008. The $150 million development will include Toys “R” Us, Babies “R” Us, Bed Bath & Beyond, Best Buy, Dick’s Sporting Goods, Michaels, PetsMart, Ross Dress For Less, TJ Maxx and a 16-screen Cobb Theaters.

“The Grove brings a high concentration of national tenants into a market that has been largely underserved by these retailers despite very rapid population growth,” Duffy says. “Prior to the Grove, residents of Wesley Chapel have been forced to drive to Tampa for the convenience of mall density shopping.”

In Sarasota, University Town Center, located at Interstate 75 and University Parkway, is a 2 million-square-foot power center that includes a Super Target. Benderson Development is developing the project, which will feature Nordstrom, Best Buy and Sports Authority. It will be completed near the end of this year. In addition to the retail component, a mixed-use center with residences, hotels and office space is planned as well.

“The entry of Nordstrom into Sarasota, together with the other anchors represented at University Town Center, confirms the high disposable income in Sarasota County and gives Sarasota its first major retail development of scale in more than 10 years,” Duffy says.

For investors, the Tampa retail market has been very active with more than 90 transactions completed since January 2006 for a value of more than $754 million. “Grocery-anchored [primarily Publix] centers are in the highest demand and are generating sub 6.5 cap rates,” Duffy says. Several larger centers including Walters Crossing, a 350,000-square-foot urban center anchored by The Home Depot and Target, and Woodlands Square, a 297,000-square-foot retail center, have also been traded. “With this type of trading, investors still seem to be bullish on all types of retail development,” says Dan Morris, director of real estate for Opus South Corporation.

With this type of investment, the climate in the region is positive. According to Colliers Arnold, rental rates rose sharply during the past year, up 11.4 percent in the Tampa-St. Petersburg region. “In-line space in well located centers with strong anchors is in short supply and the high cost of new construction would suggest that rents will remain firm in the near term,” Duffy says.

Two of the largest recent retail transactions are Cypress Pointe Shopping Center in the North Pinellas County submarket and East Lake Woodlands Plaza in North Pinellas County. Cypress Pointe Shopping Center was sold by Ramco Properties to Investcorp International for $24.5 million in March. Major tenants of the center include The Fresh Market and Burlington Coat Factory. Meanwhile, Woolbright Development sold East Lake Woodlands Plaza to Weingarten Realty & TIAA-CREF for $28.8 million as part of a seven-property portfolio. The 140,103-square-foot retail center is anchored by Publix.

The Tampa retail market continues to post improvement in fundamentals. Investors looking for properties in areas with high population growth will focus on assets in Pasco County. Growth in the Tampa market will be focused in northern Pasco, southern Hernando, southwest Hillsborough and Manatee counties.

— Daniel Beaird


The eastern panhandle of West Virginia is experiencing steady housing and population growth and national retailers are beginning to take notice as The Home Depot, Kohl’s, Panera Bread and Starbucks Coffee have all entered the market. This area of West Virginia is trying to become the next extension of Washington, D.C. Potomac Towne Center is being developed by Carl M. Freeman Companies Commercial Real Estate in Jefferson County, West Virginia and the national retailers are believing.

“We had to work hard to get retailers to take a serious look at the market,” says Kim Damion, marketing manager for Carl M. Freeman Companies Commercial Real Estate. “They had preconceived notions about West Virginia, but once they were there and witnessed what was happening, they realized that this is the next extension of the Washington, D.C., corridor.”

And the national retailers that have opened stores in the eastern panhandle of West Virginia are reporting sales figures well above their best projections. “This is a testament to how hungry the market has been for quality retail,” Damion says.

Potomac Towne Center is definitely the driving force behind attracting those retailers to West Virginia. It is a five-phase, 1.5 million-square-foot project located in Charles Town/Ranson, West Virginia. Phase I, The Marketplace at Potomac Towne Center, is open and anchored by Kohl’s, Weis, The Home Depot, Petco and Panera Bread. The balance of the center is filled by regional and local tenants.

Phase II, The Boulevard at Potomac Towne Center, is currently undergoing land preparation and will begin turning over sites this month. Its anticipated completion date is the middle of 2008. This phase will include entertainment, restaurants and a hotel. It will also bring the area’s first new office space to the eastern panhandle in almost 20 years as well as the first Starbucks Coffee.

Phase III, The Main Street at Potomac Towne Center, is in the design stages and land preparation is expected at the end of this year. This phase will be a power center with several big box merchants currently in negotiations.

“This development is successful due to the housing growth of Jefferson County,” Damion says. “Ranson is only 45 miles from Washington, D.C., and closer still to many corporate headquarters in Montgomery County, Maryland.”

Ranson is home to the Charles Town Races and Slots, which currently attracts 6 million visitors to the area each year. It is planning a major expansion of 65,000 square feet with hopes of table gaming becoming a reality later this year. If voters pass the issue in June, it will only drive more visitors to the area creating more need for restaurants, hotels and retail space.

— Daniel Beaird


Washington, D.C., has always had high population densities and above-average household incomes, which naturally attracts retailers. Vacancy in the area is expected to slightly move up, in keeping pace with some housing vacancies in the area, but is not expected to remain low enough to support rent growth in the retail market. Rent growth makes investment in the region particularly attractive to both private and institutional capital.

“The Washington metropolitan area is one of most affluent, fastest growing regional economies in the United States,” says William Kent, executive vice president of CB Richard Ellis’ investment properties and institutional group in Washington, D.C. “The strong economy in the region fuels retail sales and profits creating an ideal climate for retailers as well as for investors. In addition, tight land use controls serve to limit supply of available retail space and keep retail vacancy low.”

Investors are interested in all types of retail properties in the District including free-standing, single-tenant, well-located, unanchored convenience strip centers, grocery-anchored neighborhood and community centers, lifestyle centers and power centers. “Retail centers with the potential to increase cash flow through redevelopment and by replacing below-market rents in high demand as investors look for growth,” Kent says.

Due to the infill nature of the District, much of the land for new retail and residential development in the close-in suburbs of Alexandria, Fairfax, Prince George’s and Montgomery counties is coming from existing one-story strip shopping centers that are being rezoned and redeveloped as high-density, mixed-use developments.

The majority of the ground-up shopping center development activity in the Washington metropolitan area is occurring in the high residential growth areas well outside the Beltway, including Loudoun and Prince William counties in Virginia and Northern Montgomery, Frederick, Calvert and Howard counties in Maryland. In Northern Virginia, Wegmans has expanded aggressively having completed four transactions of 150,000 square feet each in Leesburg, Gainesville, Fairfax and Dulles.

The largest development to break ground recently in the area is National Harbor on the Potomac River, south of the Wilson Bridge in Prince George’s County. The Peterson Companies is developing this 7 million-square-foot mixed-use development that will include retail space, hotel space, a conference center and office space. One million square feet is assigned to retail space and will be built in phases with Phase I including 415,000 square feet.

“National Harbor has a massive scale and scope and it will contain the largest non-gaming hotel and conference center on the East Coast,” Kent says. 

Within the District, the largest development that includes retail space to break ground recently is Forest City’s mixed-use development that will include the new baseball park for the Washington Nationals in southeast Washington, D.C.

“With the baseball park scheduled for completion in 2008, these retail projects will benefit from increased interest in creating a 24/7 environment similar to the successful neighborhood around the Verizon Center in the East End,” Kent says.

The projects being developed around the baseball park include the Southeast Federal Center occupied by the U.S. Department of Transportation, a new Metro rail station, the Washington Navy Yard and numerous office buildings. “This surge of development is generating further developer interest to provide the retail and residential components currently lacking,” Kent says. “Both National Harbor and the baseball park are developing historically underutilized waterfront areas in the Washington, D.C., market. They will be creating destination environments for entertainment, shopping and dining in addition to more traditional daytime office public usage.”

As investors search Washington, D.C., for all retail property types, the area has proven that it can hold its own for retail transactions. In January, CB Richard Ellis represented Crow Holdings in the sale of its Fund III portfolio. This multi-billion dollar portfolio of multiple property types located throughout the United States included five shopping centers in the Washington metropolitan area valued at more than $248 million. These properties included Battlefield Shopping Center in Leesburg, Virginia; Long Gate Shopping Center in Ellicott City, Maryland; Old Town Village in Fairfax, Virginia; Gaithersburg Plaza in Gaithersburg, Maryland; and Main Street Marketplace in Fairfax.

“There is currently more capital looking to invest in retail properties than there are properties available for sale,” Kent says. “This is making multiple-property portfolio transactions more attractive to both buyers and sellers. The buyers are able to place large amounts of capital in a single transaction and the sellers are receiving a premium to one-off sale pricing.”

The District is expected to witness a slight rise in vacancy rates this year, but not enough to warrant major concern. Competition from new properties and a slowdown in the retailer demand will cause the vacancy rate to hit 5 percent this year. But, the District remains a top 10 city for retail investment in the country.

— Daniel Beaird

©2007 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.

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