Atlanta — Panelists at last week’s ICSC Southeast conference agreed that retail projects are trending toward infill development.
Krog Street Market Atlanta — New retail development in the Southeast has trended toward the discount sector, which flourished during the Great Recession, and infill projects in high-traffic markets, according to a panel at last week’s ICSC Southeast conference.
“Retail activity in the Southeast is back to location, location, location,” said Miles “Budd” Cullom, president of Knoxville, Tenn.-based CHM Development LLC. “The days are gone of being able to expect subdivisions [to be developed]. Retailers want to go where the rooftops are now.”
Cullom’s comments came during the panel, “2013: The Re-emergence of Retail Development,” at the Cobb Galleria Centre on Tuesday, Oct. 29. The panel, which was moderated by Bernard Haddigan, principal with Atlanta-based Haddigan Capital, also featured Enrique Anderson, attorney for Sutherland Asbill & Brennan LLP; George Banks, vice president with Paces Properties; and Neal Freeman, president of Watkins Retail Group.
A perfect example of a project that combines an experiential component in an urban environment is Krog Street Market, a more than 30,000-square-foot project owned and developed by Paces Properties in Atlanta’s Inman Park. Krog Street Market, which is expected to open during the spring of 2014, is the mixed-use renovation of a historic single-story warehouse.
“The challenge with [developing in] existing neighborhoods that are under-retailed is finding sites that are big enough,” explained Banks. “The good news is that rents are higher for these projects, so you don’t have to do a large 200,000-square-foot project.”
Banks also said that if developers try to bring a large national chain to infill projects, then they are likely to receive backlash from the community. This is why Paces Properties targeted local tenants for Krog Street Market, which has already established itself as a “foodie” destination. The development is about 85 percent pre-leased by restaurants including Fred’s Meat & Bread, Gu’s Dumplings and Little Tart Bake Shop. The project will also feature a modern-day food market showcasing local vendors in various stalls.
With smaller infill projects, developers can attract a variety of tenants. This is synonymous with the growing trend of retailers “rightsizing,” or downsizing their store footprints to compete with a growing online shopping industry.
“Retailers that want to open new locations are doing smaller stores. If we don’t think that will continue to happen with the growth of e-tailing, then we’re kidding ourselves,” added Cullom.
For example, Walmart opened a 2,500-square-foot store in August to cater to the students at the Georgia Institute of Technology in Atlanta.
“In terms of new development, you’ve got the discount trend and the aspirational. What I mean by aspirational is that folks want high-quality products at low prices and most of that is manufactured for outlets,” said Anderson. “There is also a huge trend in that people want to live and shop in an urban setting. We have way too many regional malls out there.”
Due to the abundance of large regional shopping destinations, the panelists agreed that developers are now beginning to provide additional experiences at their retail projects in order to attract customers. Examples include Christmas tree lightings, haunted houses, skating parks and outdoor venues for concerts or other performances.
“Retail development going forward has to have some non-traditional retail component to make it a hot commodity,” said Banks.
Freeman advised the audience that the key to creating a successful retail development is to first create demand, and then pick the supply from interested tenants. Since the targeted demographic for new retail developments is young professionals, the panelists agreed that engaging customers online is vital in creating demand and buzz for new projects.
“If you’re trying to do something different, unique and urban,” said Banks. “Then being online is crucial.”
— Brittany Biddy