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Page 6 — Retail Properties Quarterly — February 2015
T he new year is in full swing
and established retailers
are looking to execute on
expansion plans following a
strong holiday sales season.
New ideas are ready to blossom
into new stores. That means as a
retail broker, I am spending count-
less hours searching for the next
great opportunity, or pitching strong
projects that have
space available or
that are coming
out of the ground.
Though time and
time again, I hear
from my colleagues
and clients, “There
isn’t enough qual-
ity space avail-
able in the Denver
metro right now.”
However, there are
still strategies that
can lead to retail
success for those
retailers looking in
the right places.
Retailers large and small, estab-
lished or upstart, all want one thing
right now – quality space. When
looking at vacancy rates, you would
think that quality space exists in
the market, and that it’s ripe for the
taking. In reality, when focusing in
on the 7 percent vacancy rate in
Denver, you realize that most of that
vacancy is not quality Class A space.
Instead, vacancies are in Class B
or C space that retailers just don’t
want.
The current vacancy is really con-
ducive to demolition, or at least
remolding and repositioning into
a quality space that a retailer can
sink his teeth into and have a high
level of confidence in, which leads
to strong sales projections. Unfortu-
nately, that takes time and money,
neither of which retailers want to
waste. The most important factor
right now seems to be time, because
the quality space is not available.
While owners and developers are
trying to catch up to meet the cur-
rent demand, retailers are compet-
ing for quality space.
Demand for retail space is com-
ing from a number of segments, but
restaurant growth has accounted
for more than 40 percent of all
total unit growth over the past four
years, according to Garrick Brown,
economist with ChainLinks. This
is the largest market segment and
the largest demand driver for good
reason. Every fast-casual operator I
spoke with had dreams of becoming
the next Chipotle, and they all have
their own concept or spin on some
traditional offering. But what seems
to get overlooked is how tough it
can be to break through to consum-
ers when you’re surrounded by so
many established names and other
popular, emerging concepts. Denver
is one of the hottest markets in the
nation for emerging restaurant con-
cepts, and is often called a foodie
city, but that is not helping those
who are trying to make an entrance.
The old adage “location, loca-
tion, location” has never been more
important for standing out as an
operator; unfortunately, the quality
space to plant a flag doesn’t seem to
exist. So what is a retailer to do?
I am encouraging clients to con-
sider looking outside of the Denver
city limits, and I have presented
projects in secondary markets that
could be huge opportunities for
retailers. These opportunities for
expansion exist along the entire Col-
orado Front Range and even in the
Western Slope and mountain com-
munities, which often are consid-
ered secondary markets. The clear
and present advantage is the fre-
quent lack of competition and, even
more so at this time in the market
cycle, additional space availability.
I often use a pie analogy asking, “If
you only have the opportunity to get
a small slice of a big pie, wouldn’t
it be just as good, if not better, to
get a bigger slice of a smaller pie?
Or better yet, have the whole pie to
yourself?”
The other factor that often leads to
success in secondary markets is lower
costs, whether it is lower occupancy
cost, staffing cost or marketing cost.
There are some great success sto-
ries in smaller markets and some
concepts worth watching and dupli-
cating. For example, Spoons, a soup
kitchen of sorts, is one of my favor-
ites and one of my stops any time I
am in Fort Collins. Another is Post,
a Big Red F Restaurant Group con-
cept, based around a brewery and
chicken menu in Lafayette. There is
also ToGo’s, one of California’s larg-
est sandwich chains, with over 325
locations, which just opened its first
Colorado store in Colorado Springs.
These retailer successes translate
into developer and owner success
stories as well. Over the course of
the last 12 months, I have seen new
projects preleased, and, in some
cases, fully leased before delivery in
markets like Castle Rock, Loveland
and Lafayette – some had written
these off as locations not worth the
time and money. Rather than writing
these secondary markets off, I am
encouraging my clients to focus on
them as some of the best opportuni-
ties of 2015.
Denver will continue to offer great
opportunities, new projects, renova-
tions, creative reuses and adaptions,
but the secondary markets hold a lot
of consumer dollars for those willing
to go capture them. It will take some
outside-the-box real estate search-
ing and analysis, and some creative
deal structure, but for a bigger piece
of pie, it seems worth it to me.s
Northern Colorado Update
Michael
DePalma
Vice president,
SullivanHayes
Brokerage, Boulder
Retail space is in demand for fast-casual restaurants.
Secondary markets like Lafayette may provide opportunities for retailers.