CREJ - Retail Properties Quarterly - September 2015
Real estate opportunity, like any other market-driven discipline, goes through cycles. For years the rolling green open fields and suburban parcels just waiting for an idea were plentiful. New homes were in demand with affordable financing and there was an aggressive and expanding stable of national retailers who followed the housing and filled retail developments. New development was build-to-suit and retailers and restaurateurs would knock out cookie-cutter designs and stores aimed at keeping costs low and operations as much the same as possible. Today’s real estate realities are higher costs for all aspects of development and construction, challenging financing and fewer retailers to help populate new centers. It is becoming more difficult to find clean opportunity locations and, once developed, to price it affordably. In addition, the suburbs, traditional hotbeds of development, are becoming harder to be positioned where and how people want to live. While open-space development continues in the outer edges of the metro area, developers, retailers and restaurateurs are looking to older and previously underdeveloped neighborhoods and cities as the location for their next great idea or concept. Enter urban and transit-oriented development. As connectivity and lifestyle choices become real decision points for today’s customer, finding locations within the older parts of the market is good business. An urban infill project requires creativity and vision by all parties in a development – developer, investor, tenant, retailer and, in many cases, the cities where the opportunities lie. The most successful projects in recent years have had a distinctive urban flair to them – Lower Downtown, Union Station, Highlands, Stapleton and Lowry are examples of crown jewels of development in recent years. Newer projects like River North and northwest Aurora’s Westerly Creek area are poised to offer developers and entrepreneurs alike wonderful opportunities to create livable, creative and profitable projects. The proliferation and success of the light-rail system has opened up new development possibilities in many communities. In Aurora alone, there are nine light-rail stations, all with development opportunities for residential, office or retail. Unlike other urban infill projects, TODs offer the retailers and developers new and well-positioned space in established neighborhoods. Because most of the neighborhoods already are located close to the core of downtown and offer housing that has character and mature landscaping, this is attractive to young professionals. TODs can be new while still offering what’s best about an existing neighborhood. Since many of the new residents to Colorado appear to be living near and around downtown, TODs meet the needs for urban living, transportation and connectivity without having to go to the suburbs to find an interesting place to live. For retailers and restauranteurs, urban infill locations provide unique challenges. While the suburbs offer uniformity and space, infills and retrofits tend to have irregular space, parking issues and infrastructure expenses needed to bring the best locations to code. In the past, that was not worth the hassle, but urban neighborhood demographics are changing and as the lack of quality suburban locations become scarce, many retailers are embracing the challenges of urban locations, flexing their design and operational muscle, and looking for their place in serving these markets. Sprouts built its first urban store in Colorado on Colfax, and it is one of its top stores in the country. Nearby, Chic-fil-A designed a new urban prototype, and it is performing strong in sales. These successes, in part, spawned a mini development phase in the surrounding area. Cities also have to be willing to work with developers and retailers to help make infill projects work. Aurora is proactively working with large and small developers who are interested in updating potential locations for retail and residential development, especially in the northwest neighborhoods. Incentives for major tenants, concepts and developments aimed at growing the surrounding neighborhoods, increasing housing density and increasing sales tax revenue are part of the support and focus of the city’s program. An example of urban infill development partnership is Stanley Marketplace, slated to open spring 2016. Located in a refurbished aviation factory, Stanley Marketplace will host restaurants, including the newest Kevin Taylor concept, shops, services and entertainment venues. Like its national counterparts, Chelsea Marketplace, The Ferry Building and Gotham Market, Stanley Marketplace will offer metro customers a regional destination, while servicing the nearby needs of the Aurora, Stapleton, Anschutz and Lowry neighborhoods. Since its announcement, Stanley Marketplace has served as the conduit for new residential, retail, restaurant and innovation office development activity in the Westerly Creek and northwest Aurora area. Couple Stanley Marketplace’s commercial infill development with the facts that the immediate surrounding area is one of the most affordable housing markets in the metro area and is less than 30 minutes from downtown, and you have a recipe for potential development success. Urban infill is a trend that is expected to drive much of the metro area’s new and most interesting development growth over the next few years.