COVER STORY, DECEMBER 2008

RETAIL DEVELOPMENT FOR THE LONG TERM
Coleman Wood

Despite the ongoing downturn in the commercial real estate market and the decrease in consumer spending, retail developers are still bullish on the Northeast for successful developments. Right now it is about meeting the needs of the market and seeking out some the richest and densest demographics. The current economy has forced many developers to rethink their tenant mixes and get as creative as possible to ensure projects can turn a profit now and well into the future.

In this month’s issue of Northeast Real Estate Business we sat down with several developers to discuss some of their upcoming retail projects throughout the Northeast region. 

CooperTowne Center

In Somerdale, New Jersey, a renaissance is currently under way that centers around the redevelopment of the White Horse Pike corridor, which is itself being expanded. It is in this area, specifically at the corner of White Horse Pike and Evesham Avenue, that National Realty & Development Corp. (NRDC) is doing its part to revitalize the corridor with the development of CooperTowne Center.

The new shopping center comprises the redevelopment of a retail property first developed in 1988. The property was originally anchored by Caldor and Mayfield Food Town, but Caldor’s bankruptcy resulted in an 83,000-square-foot vacancy. A department store took over the space, but also went bankrupt not too long after. When Mayfair was sold to Shop N Bag, which also later went bankrupt, the center had developed a reputation.

“It was a center that, for all intents and purposes, was snake bitten because of several bankruptcies,” says John Orrico, president of NRDC.

So in October, after a 4-year approval process, the groundbreaking occurred for CooperTowne Center, a 52-acre retail center that Orrico hopes will be more than just another shopping center for the residents of Somerdale and Magnolia. The existing 283,000-square-foot shopping center will be razed except for 83,000 square feet, and a 14,000-square-foot building will be built in place of the demolished area. For the existing structure, the façade will be redone, a new roof will be installed and the building’s interior and mechanical systems will be upgraded. A 203,000-square-foot Wal-Mart will occupy a freestanding location at the site, and three pad sites will be constructed along White Horse Pike.

“We’re creating a traditional Northeast downtown look within this project,” says Orrico.

The shopping center will feature a two-story façade with variations in design, in an attempt to recreate the feel of a traditional downtown area that evolved over time. NRDC is putting in 24-foot wide sidewalks to encourage pedestrian traffic and outdoor seating areas for restaurants, as well as parallel parking in front of stores. A plaza within the center can be closed off for community events without disrupting traffic.

Some tenants from the center’s previous incarnation, including Cinemark and Pizza Hut, are remaining at their locations. Cinemark, in particular, is launching a $1 million renovation to upgrade its facilities. Other tenants include LA Fitness, Dollar General, Gamestop and Applebee’s. In addition to these big-name tenants, NRDC is also hoping to attract regional and local tenants such as bakeries and coffee shops that make a city’s downtown unique.

“When I go to my hometown, I walk downtown and there is a coffee shop and a pizza shop. You know the people who own them; you’ve gone there for years. And that’s the type of feel we’re trying to create here,” says Orrico.

Barring any delays, Orrico is hoping to have the project complete by November 2009. Despite the relatively early stage of construction, the project is already gaining recognition. The state of New Jersey declared it a greyfield development, one of only four in the state. This designation is for an economically blighted development, much like a brownfield designation is for an environmentally blighted area. It has also become a pet project for the New Jersey Office of Smart Growth, which uses CooperTowne Center as an example of how to redevelop an urban/suburban fringe center.

“It’s being looked at as a model of how to do grayfield developments in New Jersey,” Orrico says.

Levittown Town Center

Located in the suburbs of Philadelphia, Levittown, Pennsylvania, has a unique history. It was the second planned community built by William Levitt, who is sometimes credited with creating the American suburb. Largely built out in the 1950s, the community is known as a working class town. One feature the community lacked, though, was services for this demographic. Levittown is surrounded by more affluent communities with upscale retail options, but nothing was available for more value-oriented consumers. This was the impetus for the renovation of one of the area’s major retail centers.

“[Levittown Town Center] is the brownfield redevelopment of the former site of an open-air, regional mall built by the famed William Levitt & Sons in 1957,” says Adam Ifshin president of DLC Management Corp. “We bought the site, demolished the mall, did a multi-year environmental remediation, and now we’re building this in its place.”

Levittown Town Center is a 458,000-square-foot power center that is under development at this former site. DLC acquired the property in 2002 and spent the next 5 years completing an extensive environmental clean-up, which, among other things, removed approximately 1 million square feet of asbestos-laden material and 66 underground storage tanks.

“[Once complete], it’s going to be, by far, the central shopping location for people in the immediate trade area,” says Ifshin. “It sits at the intersection of Levittown [Parkway] and Bristol Highway — it’s like First and Main for Levittown and the borough of Tullytown that it encompasses.”

Some retailers, including The Home Depot, Wachovia and KFC/Taco Bell, opened in 2004. The balance of the center is currently under development, with leases signed for 75 percent of the space, with approximately 40,000 square feet left to lease.

“I think we’ll be leased up by the first quarter of 2009,” Ifhsin says.

In addition to The Home Depot, Levittown Town Center will be anchored by Wal-Mart Supercenter, Ross Dress For Less, Famous Footwear, Dollar Tree and Advanced Auto Parts. Another 60,000 square feet of inline retail space has also been signed. All of the tenants that have been announced plan to open their stores between the second and fourth quarters of 2009.

“We are focused, not only in economies like this, but all the time on retailers who provide an extreme value proposition,” says Ifshin. “For example, we do not build for retailers such as Talbot’s, Chico’s and Banana Republic. We build for Wal-Mart, Target, Lowe’s Home Improvement Warehouse and The Home Depot...And if you think about who we have put in the center, for the times that we’re in, people need to save money — they need to stretch their dollar further.”

“Those are all tenants that really, really help the consumer in a time where the consumer is stretched,” he adds.

Monroe Marketplace

The grand opening was held in October for Monroe Marketplace, a 600,000-square-foot, open-air retail center located in Monroe, Pennsylvania. Phase I of the center, comprising approximately 425,000 square feet over 123 acres, is substantially complete, with tenants opening their doors between the grand opening and spring of next year. Retailers already doing business include the three anchor tenants, a 127,000-square-foot Target, an 81,000-square-foot Giant Food Store and a 68,000-square-foot Kohl’s — all of which are making their first appearances in the market.

Other tenants making their regional debuts at Monroe Marketplace include a 50,000-square-foot Dick’s Sporting Goods and a 22,500-square-foot Bed, Bath & Beyond. Restaurant tenants already open include Red Robin and Starbucks Coffee. Rounding the list of Phase I tenants include Sally Beauty Supply, which should be open in time for the holidays, and Susquehanna Bank, which will open first quarter 2009.

“We want to bring exciting new retail concepts that consumers want to see,” says Nate Allison, director of development for Pennsylvania Real Estate Investment Trust (PREIT), the developer and owner of the project. “We hope that  Monroe Marketplace will be the premier shopping center destination in Snyder County.”

Another 55,000 square feet of the center will be open by the spring, constructed as part of Phase II. Tenants for this phase will include Staples, Michael’s, PetSmart and Famous Footwear, with more to be announced closer to the spring. Allison says PREIT is not being too hesitant to build out the rest of Monroe Marketplace, given the current economic climate.

“Phase II is going to come over the course of the next few years,” he adds. “Many of the retailers who are looking at these types of markets are taking a wait-and-see approach in terms of being more selective in their deals and doing broader due diligence.”

Allison notes that this was also the reason some of the retailers chose a spring opening, rather than this fall. Getting the deal signed is much more important than the tenant’s opening date right now.

“The good news, though, is that they’re opening up,” Allison says. “A lot of the projects that are in markets that may have been similar demographically to Monroe, have a lot of retailers terminating leases. It shows that this is a strong market, and that this is one where the national players want to be.”

PREIT is also taking steps to make the center as aesthetically pleasing as possible. Cultured stone and stamped asphalt add detail to the paved surfaces, and similar colors and materials throughout the center give the different retailers a uniform appearance.

“It is a truly beautiful shopping center,” Allison says. “Oftentimes, retailers force you to utilize their prototype, and limit your ability to create and police the center. We were able to, very early in the process, to get the tenants to buy into a design theme for the shopping center.”

Alewfie Brook Parkway Shopping Center

Linear Retail Properties is currently redeveloping the Alewife Brook Parkway Shopping Center in Cambridge, Massachusetts. The shopping center, which consisted of a 30,000-square-foot, multi-tenant retail building and a free-standing, 6,200 square foot vacant building was purchased by Linear February 2007.

“When we purchased this tired, outdated center last February, we knew we had acquired an A-plus retail location but didn’t really expect to be underway with our redevelopment work so soon with commitments from coveted retailers such as Trader Joe’s,” says Bill Beckeman, president and CEO of Linear Retail Properties.

The development firm demolished the 6,200-square-foot building, formerly occupied by a Ground Round Restaurant, and set to work on a new 17,000 square foot, multi-tenant retail facility. The new building fronts Alewife Brook Parkway and features ample parking behind and to the sides of the site. The building has been designed to accommodate six tenant spaces, most of which was been pre leased prior to construction. Occupancy is scheduled for Spring 2009.

The 30,000-square-foot building is slated to undergo a complete gut rehabilitation and will be re-tenanted with a new 16,000-square-foot CVS/pharmacy end cap and a 14,000-square-foot Trader Joe’s. Construction will commence in February 2009 and the new tenants will open by the beginning of 2010.

 “We had considered a much larger scale mixed-use development on the site, but the intense interest from retailers steered us away from the complexity presented by competing uses and toward more simplicity,” explains Beckeman. “Our team focused on making the layout as attractive as possible for retailers and we ended up with an aesthetically appealing blend of prominent storefront retail spaces within a conventional high traffic volume shopping center. The retailer reception has been exceptional and heartening in this uncertain business environment.”

Raritan Town Square

Lowe’s Home Improvement Warehouse and Longhorn Steakhouse recently opened their doors at Raritan Town Square, a 500,000-square-foot mixed-use project located at the intersection of State Route 31 and County Route 523 in the New Jersey township of Raritan.

This fall has been busy for Raritan Town Square, a 500,000-square-foot mixed-use project that is located at the intersection of State Route 31 and County Route 523 in the New Jersey township of Raritan. Tenants are already opening their doors, none bigger than Lowe’s Home Improvement Warehouse, which will serve as one of the anchor tenants. It joins Longhorn Steakhouse, which has opened in an outparcel location at the site. This fall will also see groundbreaking for the center’s second anchor, a 145,000-square-foot Wal-Mart, which is slated for a mid-2009 completion.

The project has been under development for almost a decade. The site was the former location of the Flemington Fair & Speedway, which was very popular among the residents. At its peak, the annual Hunterdon County Fair, which was held on the grounds of the speedway, attracted up to 100,000 people each day of the fair. But once the fair moved and the speedway shut down, development commenced for the new project.

“Raritan Township is typical of how many suburbs grew in New Jersey, and that is without the traditional, walkable downtown environment,” says Scott Loventhal, director of development for Garden Commercial Properties (GCP), which is serving as owner, developer and general contractor for Raritan Town Square.

With this idea in mind, GCP set forth to create a Main Street-style project that could serve more than residents’ retail needs. The perimeter of the project will feature retail pad sites, which will lead into the Main Street area of the project. This area will feature first-floor retail, with spaces ranging in size from 750 to 5,000 square feet, with approximately 65,000 square feet of office space on the second floor of the buildings. The retail component is currently 75 percent leased, with tenants including Drug Fair, IHOP, a bank on one of the pad sites, and the aforementioned anchors and restaurant.

In addition to the retail and office components, a civic component will be located on 10 acres at the rear of the site. Plans as of press time include an outside amphitheater for performances, a football facility for youth football leagues, and an 8,400-square-foot community center.

“The community wanted to see us give something back, rather than simply build a commercial center,” says Loventhal.

More retailers are hoping to join Lowe’s and Longhorn by Christmas, with a majority of tenants scheduled for a spring 2009 opening. The project itself is expecting to be fully built out in fall 2009, but the date could be pushed into spring 2010. Raritan Town Square is currently 75 percent leased with the retail component; the office component is not moving as fast, but there are a few tenants that have been signed.

“We certainly think it will be a destination for the entire region,” says Loventhal.

©2008 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.