ARCHIVED  January 1, 1997

Are we overbuilt? Analysts warn of glut

By year’s end, a national video-rental chain will build 20 more stores in Northern Colorado and southern Wyoming.

At least three retail centers will be added in Fort Collins by 1997.

About 40 businesses emerged in six years along the south side of Del Range Boulevard near Cheyenne’s Frontier Mall – a space that was vacant in 1990, according to Debbie Tamlin, president of the ZTI Group, a Fort Collins real estate company.

Retailers’ interest in the area is high. But is it too much too soon?

Some say yes. Expect a flooded retail market if even 50 percent of the proposed retail projects in Fort Collins are built in the upcoming year, said David Veldman, president of Veldman Morgan Commercial in Fort Collins.

Tamlin, whose company leases retail space in Fort Collins, Greeley and Cheyenne, says no. Retailers study population growth carefully. They wouldn’t build if they didn’t expect to succeed, she says.

But Ed Stoner of Poudre Property Services in Fort Collins says history has shown that, in Fort Collins at least, “we always overbuild. People will always say, ‘I’ll get in before the others.'”

The competition between the University Park Holiday Inn and the Fort Collins Marriott hotel/convention centers in the late ’80s is an example, he says. They “finally opened in the same month, and it hurt them both for a few years.”

What’s certain is that a few different company officials in Fort Collins are looking warily at a rising number of submissions to the city’s planning department for retail construction. The situation is different in cities such as Loveland and Greeley, where some say retail development is falling short of the demands of healthy population growth.

Loveland and Greeley’s retail vacancies are holding steady at 5 percent, according to Realtec Commercial Real Estate Services Inc. In Fort Collins, the percentage of vacant space shifted from 7.9 percent in July to 10.5 percent in August, reflecting the addition to the database of the OakRidge Retail Center on Harmony Road and the Albertson’s Center on North College Avenue.

Greg George, planning manager for the city of Loveland, said that there are no applications for projects actually pending that would fit into the retail category. This, despite a 4 percent growth rate in the city’s population and the need for a commercial center, including grocery stores, near growth areas.

“We are experiencing considerable (residential) growth on the northwest end of town,” George said. “We will have to provide retail services there soon.”

The city is working with a local developer on a plan to develop a 12- to 15-acre commercial site that could include a grocery store in southwest Loveland at Taft Avenue and West First Street. Any formal submission of the plan is at least 60 days away.

A second commercial center, which would include a grocery and possibly a drug store, has been proposed on the northeast side of town at North Garfield Avenue and 50th Street. That plan is also in the beginning stages, George said.

“We don’t need another shopping center,´ said Larry Melton, a broker with Realtec in Loveland. Developing the southwest end of town is probably not a bad idea, however, in order to win back residents located in that end of town who spend money at Berthoud’s new 40,000-square-foot retail center, he said.

As for Greeley, where retail is growing lopsidedly around the Greeley Mall at the expense of the downtown area, the concern isn’t whether the city is overbuilt in retail. It is the less-than-ideal situation of commercial growth unevenly concentrated.

“I think we are over commercially zoned near the mall,´ said Greg Thompson, planner two for Greeley. In the last few years, West 23rd Avenue near the mall has seen the addition of a super Wal-Mart and Kmart, as well as three hotels and three or four restaurants, he said. Downtown’s share of the pie has been three or four restaurants in that same period of time. Thompson said he’s seen a slight increase in commercial building permits, but it seems to be keeping up with the population.

Not so in Fort Collins, where company officials worry that although the market isn’t overbuilt now, a deluge of proposed retail construction for 1997 could create exactly that situation. So far this year, Fort Collins has given final approval to at least 108,489 square feet of retail projects.

“No one is sure if a planned project will be approved,” Veldman said. “But these people are spending vast amounts of money, indicating high interest in the area. They have announced national users.”

Fort Collins will see at least three new retail centers under construction in 1997: the redevelopment of the 150,000-square-foot University Towne Center on South College Avenue, the construction of the 342,000-square-foot community/regional shopping Harmony Towne Center, on 36.5 acres on the north side of Harmony Road east of College Avenue (the Pioneer mobile-home site), and the Harmony Safeway Marketplace plan, which is a request to develop a total of 89,147 square feet on 10.4 acres at the northwest corner of Harmony Road and McMurry Avenue with unspecified retail uses and a Safeway grocery store. The Harmony Safeway Marketplace plan could receive final city approval before the end of 1996.

If approved by Fort Collins city planners, these projects (excluding the University Towne Center redevelopment project) will add at least 431,147 square feet of retail space to Fort Collins in 1997.

“Two things happen if you put in two new grocery stores and two drug stores near each other,” Veldman said. “It hurts the other drug stores and grocery stores, and no one is very profitable.”

Whether Fort Collins will be over-retailed will depend on whether the construction is completed in phases, and if the developers have tenants ready to move in. If not, expect a hike in retail vacancies and low profits, Veldman said. Veldman Morgan Commercial manages and leases one million square feet of office and retail space.

“Looking at the condition of vacancy rates now, the market isn’t overbuilt,´ said Mike Braskick of Sitzman-Mitchell & Co. of Fort Collins. “The rates would be dropping. I’d forecast that they would stay strong or increase.”

Retail lease rates per square foot in Fort Collins are $8 to $10 downtown, $11 to $12.50 outside downtown and $14 to $17 for new spaces. He said that although he was aware of a few large retail projects in the planning stages, “you have to cross that bridge when you get to it. Sometimes they just have a local effect.”

Sitzman-Mitchell manages and owns approximately 100,000 square feet of retail space. Many of its lessees are small businesses, and most of that has been leased out for at least two years.

Looking at the market from a regional standpoint, Tamlin, president and owner of ZTI Group, says that after the bust years of the 1980s, today’s boom is a welcome change. She said that because of the time it takes for the city to approve a project, the possibility of overbuilding is remote.

ZTI Group leases and develops 900,000 square feet of retail space in Fort Collins, Greeley and Cheyenne, Wyo. ZTI is based in Fort Collins and is representing a national video chain to open 20 new stores.

“I don’t believe retail is overbuilt,” Tamlin said. “In Fort Collins, it takes two years to go from vacant ground to a project, and in that time, the market changes a lot; it may even be dropped.”

By year’s end, a national video-rental chain will build 20 more stores in Northern Colorado and southern Wyoming.

At least three retail centers will be added in Fort Collins by 1997.

About 40 businesses emerged in six years along the south side of Del Range Boulevard near Cheyenne’s Frontier Mall – a space that was vacant in 1990, according to Debbie Tamlin, president of the ZTI Group, a Fort Collins real estate company.

Retailers’ interest in the area is high. But is it too much too soon?

Some say yes. Expect a flooded retail market if even 50 percent of the proposed retail projects…

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