November 2015 — Retail Properties Quarterly —
Page 17
C
olorado’s retail base contin-
ues to grow, with vacancy
rates below 7 percent, new
retailers entering the Denver
market and a steady increase
in rental rates. One aspect of the
retail market that is seeing excep-
tional activity is older retail centers
– built prior to 2000 – that have been
given face-lifts by their property
owners and now are seeing a buzz
of leasing activity.
These older retail centers – some
once only known for their pothole-
filled parking lots and tired mix of
tenants – were easily passed by in
years past. Now, shoppers are taking
notice, due to an upgrade to cos-
metics and a vast improvement in
the quality of shopping and dining
options.
Two older centers – one in Colo-
rado Springs and one in Denver –
enjoyed recent upgrades and a new
caliber of tenants. Both centers wel-
comed new grocers within the past
24 months and, at the same time,
underwent renovations that helped
to open the doors to new opportuni-
ties.
A new grocery anchor opened in
a center in Colorado Springs about
a year and a half ago and over $1
million was spent on renovations,
including new fascias, store fronts,
monument signs and a new park-
ing field. Since that time, there was
a significant increase in occupancy,
from half vacant to over 75 percent
occupied, and more interest from
quality tenant prospects than the
center had realized in decades.
In addition to the grocer, the qual-
ity names that now
have storefronts in
this center include
One Main Finan-
cial, H&R Block
and Dickeys BBQ.
This is a major
improvement over
the previous tenant
mix that included
a check-cashing
business and a
marijuana dispen-
sary, both of which
have been back-
filled by a vision center for kids.
Another grocer opened in a long-
time Denver retail center less than a
year ago, and the owner reinvested
substantial sums into the renova-
tion of the property. Since the grocer
was announced as the new anchor
tenant and renovations were com-
pleted, the occupancy at the center
went from 79 percent to 89 percent,
with a vastly improved tenant mix.
The owner currently is negotiating
leases for an additional 6,000 square
feet.
With these two centers serving
as prime examples, retail property
owners across the Front Range are
finding a formula that works to rein-
vest in their dated properties and go
out and attract the types of tenants
that will attract a shopping crowd.
While there are few large anchor
tenants looking to open additional
locations in Denver, there are still
many opportunities in the 10,000- to
20,000-sf range.
For owners who have older retail
centers, and a tenant mix that isn’t
quite up to par, here are some things
that you might want to consider.
Reinvest in the property.
Unan-
chored centers outside of core urban
areas are difficult to lease. Once
a new anchor is secured, owners
should consider remodeling the
center. A majority of unanchored
centers in Denver and the sur-
rounding areas have grown tired. A
new anchor or a renovation should
increase leasing activity; however, a
face-lift in conjunction with a new
anchor will assist in strengthening
existing businesses in the center
and attracting strong new business
to call the center home.
When a center is renovated in
conjunction with adding a new
anchor, businesses typically see
large increases in sales, which in
turn allows them to afford to pay
more in rent. This also allows own-
ers the opportunity to lease space to
stronger tenants.
Be a deal maker.
In the downturn
tenants could negotiate aggressive
deals with desperate landlords. Now
given the increase in retail demand
coupled with the decline in retail
space, many property owners are
extremely aggressive in negotiating
deals. Tenants have responded by
negotiating multiple deals in a given
trade area, which allows them to
move forward with the best offer.
If a property owner is too aggres-
sive in his negotiations, the tenant
likely will move their efforts toward
leasing space in a center owned by
a more agreeable landlord. Success-
ful landlords should place a higher
value on adding strong businesses
to their centers than negotiating to
some idealist lease.
Respond quickly.
Many landlords
are slow in responding to tenant
inquiries. A quick response shows
a tenant that the owner is excited
about the possibility of adding them
to the center. For a mom-and-pop
business, a quick response to an ini-
tial inquiry may be enough to focus
its attention solely on one property.
Also, brokers represent a majority of
tenants, and they would rather work
with responsive landlords.
If a landlord is known as unre-
sponsive, brokers and tenants will
exhaust all other options before
dealing with that landlord. Con-
versely, if a landlord responds
quickly, a broker or tenant will try to
bring them more business. A quick
response conveys respect for both
the prospective tenant and their
broker, which does not go unnoticed.
Strive for a win-win deal.
There is
a misconstrued idea in the busi-
ness world that in order for some-
one to “win” someone else has to
“lose.” Lease negotiations need to
be structured around the underly-
ing premises that a tenant wants to
lease space in a shopping center and
the owner wants to add them to the
center. Many owners and tenants
act as if showing too much interest
weakens their ability to negotiate a
deal. I have found the exact oppo-
site to be true. When owners take
this approach, they actually build
more of a partnership with a pro-
spective tenant, laying the ground
work for a much more efficient lease
negotiation.
s
Blake Larson
Senior broker,
Legend Retail
Group, Denver
Investor Insight
