CREJ - Retail Properties Quarterly - February 2015
As I think about retail in Colorado, two specific trends come to mind – shopping centers have made an effort to upgrade and big-box retail is downsizing. There has not been much new shopping center development, but there have been many redevelopments of existing centers. Shopping centers and strip malls provide an ease of use and single-stop convenience for a quick shopping outing. Usually, a stop at the anchor retailer is followed by a visit to a small shop next to it and then you are on your way. It is a great model that leads to success for all retailers involved. However, success for all is based on success for one, the anchor tenant. Time and time again, centers that lose the anchor tenant struggle to maintain business. Courting a new anchor tenant can require extra work. In order to complete the deal, the anchor tenant may want upgrades. The request for a new façade for the anchor tenant, and the rest of the center, is becoming a typical scenario. At centers like Villa Monaco in Denver and Westminster City Center, the new face-lifts are spurring development. The center becomes attractive not only to shoppers, but also to new retailers who want to get in on the action. The bottom line is having a successful anchor tenant and adding a new look can make or break a shopping center. Think about how many times customers shop at the anchor store, and then visit several of the small shops on their way out. Speaking of anchor tenants, the grocery saturation is still ongoing with King Soopers leading the way. Walmart, Whole Foods, Safeway, Trader Joe’s and Sprouts are following suit, and soon Winco Food also will have a presence in the Colorado market. Smaller footprints, which give the impression of a smaller local grocer, appear to be the focus of these stores. However, there are exceptions, such as the new King Soopers, built by Maxwell, at Broadway and Littleton, which is 20,000 square feet larger than its traditional stores. The market also is busy with urban, mixed-use properties. Quickserve restaurants and smaller users are very popular, and we are seeing lots of multitenant ground-up suburban projects. The sites with better visibility are in high demand, while the market in general is experiencing lower vacancy and higher rental rates. The larger developer/shopping center owners have a strategy of approaching underperforming big-box retailers, renegotiating leases and taking back some space. This approach allows those owners to lease smaller space to smaller users, therefore gaining more rent for their center. The other theme we are seeing from large big-box retailers is subleasing space to retailers to sell their product inside of the main tenant. JCPenney has subleased space to Sephora, a skin care, makeup and fragrance retailer. Walmart has similar set ups with health care, tax filing and eyeglass stores located inside the large retailer. Subleases enable the big-box retailer to maximize return on investment – it costs space, but the stores are able to collect rent on it.