NORTHEAST SNAPSHOT, NOVEMBER 2005
Syracuse, New York, Retail Market
The four-county Syracuse, New York, MSA continues to show positive trends relating to retail activity. For example, outside and local investors are still interested in the market: Philips Edison recently acquiring the Western Lights Shopping Center in Syracuse; Kimbrook Plaza in Clay, New York, has changed local ownership; Michael Wachs Investments acquired two centers in Oswego, New York; and an as yet undisclosed buyer now owns the MarketFair North Plaza in Clay. Developer's Diversified Realty and New Plan Excel each have put several trade area properties on the bidding block in efforts to cull non-core properties from their portfolios.
In general, these new owners typically are looking to increase their upside by actively seeking new tenants and by remodeling and expanding their new acquisitions. The addition of a freestanding Tractor Supply building at Kimbrook Plaza and the expansion and remodeling of Oswego Plaza to include Bed, Bath & Beyond, Aspen Dental and Olympia Sports are examples of such. In addition, Macerich successfully completed its Wilmorite portfolio acquisition; thus, it now locally owns the ShoppingTown and Great Northern Malls and is considering renovation plans for both properties.
A majority of the retail activity is coming from ground up development and de-malling. COR Development is closing in on 100 percent occupancy at its Fayetteville Town Center, a mall conversion project, with the YMCA already expanding after being open less than a year. In Cicero, New York, THF Realty has completed Phase I of its Cicero Market Wal-Mart Supercenter-anchored project and is now lining up tenants for the second phase. Nearby, Tri-Land's The Market Place has completed it's transformation from enclosed mall to open air center with the addition of Office Max, whose summer 2006 opening will fill the last remaining vacancy on the lease plan. Camillus, on Syracuse's West side, has been a hotbed of new construction now that local zoning has finally loosened restrictions allowing much awaited retail and restaurant businesses. Benderson Development has scraped the former Camillus Mall and construction has started on the new Lowe's Home Improvement Warehouse and Wal-Mart Supercenter co-anchor buildings.
Furthermore, several local developers also have built smaller peripheral developments in this immediate area to feed off the big box traffic. Cameron Group has several development projects planned or already in the works including Fingerlakes Crossing in Auburn, New York, west of Syracuse. Pioneer Group plans to begin demolition of an old factory this fall to make way for the groundbreaking of its Lowe's-anchored project located on Midler Ave at Route 690 in Syracuse. Rave Cinemas is slated to begin construction of its project right next door in 2006. Syracuse University has embarked on a plan to acclimate some of its campus into the Downtown area and has already acquired and begun remodeling several buildings that will be home to various school programs.
On top of this, demand for urban living has inspired numerous residential conversion projects such as the former Hotel Syracuse as well as Mizpah Towers. If successful, these projects most likely will spur demand for ancillary retail. The highly touted DestiNY USA, a transformation of the existing Carousel Center Mall is now in the hiring and pre-marketing stage. Construction is set to begin on the initial 800,000-square-foot expansion phase required to extend the existing mall PILOT agreement.
Retail development has been taking place in some areas to alleviate pent-up demand, while in others it is occurring to meet increasing demand from consumers as well as from retailers looking to expand and relocate within the various submarkets. Generally speaking there is no speculative development going on in the greater Syracuse retail trade area. Older properties either are being razed to accommodate new buildings and tenants or are being converted to other uses. The new projects typically revolve around a big box anchor with limited development of ancillary space and outparcels to satisfy demand from smaller tenants that usually co-locate with the anchor. Vacancy rates have been fairly stable and have been trending lower with the cautious ‘build as needed' development environment. Coincidently, market lease rates also have been stable to increasing due to tightening demand for well located properties. Two notable announcements of late are that The Bon-Ton will be closing two of their four Syracuse area department stores and that Wegman's will be closing their fourteen-store Chase-Pitkin home improvement chain, which has three 80,000-square-foot stores in the immediate trade area. While these developments will cause an upturn in the overall market vacancy rate in the short run, the majority of the closings are in Class A properties and should actually benefit the properties and owners in the long run as they are leased at higher rates with more desirable tenants.
The retail growth is spread fairly evenly throughout the entire Syracuse market with national, regional and local developers all sharing in the activity. Some significant deals that were completed over the past summer include Ashley Furniture taking close to 65,000 square feet for their first area store in the Northern Lights Shopping Center on Route 11 in North Syracuse, contiguous to the recently opened Christmas Tree Shoppes. Guitar Center opened in about 17,000 square feet at the Empire Plaza on Erie Boulevard in DeWitt, New York. Wal-Mart Supercenter opened a short while ago at Cicero Market as did Lowe's at the Market Place, both on Route 11. Sports Authority opened its second area store at Carousel Center in October. Lowe's has identified several sites for 2006 openings and Wal-Mart looks to relocate stores to house their Supercenter format. Target also has expansion planned for the Syracuse MSA over the next year or two. Walgreens will soon be sprouting on dominant corners as they go through the zoning and planning processes in numerous townships. Regional drugstore player Kinney Drugs also has been quietly opening stores. Restaurants including Applebee's, 99 Pub, Red Robin, Ruby Tuesday, Famous Dave's and Texas Roadhouse to name a few are actively seeking and signing up prime sites in the market. Moe's Southwest Grill and Quiznos are both new to the market. Tractor Supply has come back to the market with two 20,000+/- square foot built to suit stores on Route 31 in Clay and on Route 298 in DeWitt. Country Max, a regional garden store, has replaced the 15,000-square-foot Agway store, also located on Route 298. Aldi has added another 15,000-square-foot space in Glenn Crossing Plaza on Route 57. Numerous other retailers have expressed first time or renewed interest and are actively reviewing sites in the market.
Development in the suburbs has been somewhat predictable while urban retail development has remained somewhat of an enigma. Thus, the area of interest to watch in the upcoming year will be greater Downtown Syracuse, especially in a mayoral election year. The night life already exists and now the charge is to keep residential development and conversion up with demand to bring back the 24 hour a day lifestyle needed to sustain a dynamic urban core. Though not technically within the boundaries of Downtown Syracuse, the DestiNY USA project is close enough to have a strong impact on what goes on in the city. Whether only 800,000 square feet or 5 million square feet of new space is ultimately built, DestiNY will affect businesses and residents in the immediate area. The December 2005 political and financial deadline draws near to commence expansion of the Carousel Center Mall. This development is expected to become a resort on par with Mall of America, according to the project developer.
Syracuse remains a stable market in which to do retail business and investing. Though not as glamorous as some of the major metro markets, it's a safe and solid place to live, work and shop that is finally receiving well deserved recognition from outsiders. With its economic diversity and a four season climate that is relatively immune from the tragic natural disasters that seem to plague other well known U.S. cities on an annual basis, the Syracuse MSA is poised for further growth and prosperity throughout the upcoming year.
— Larry J. Socia is the retail division director at NAI Pyramid Brokerage Company, Inc.
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