Strip centers fill vacancies with service tenants

With the popularity of lifestyle centers and the consolidation of consumer needs into big box stores, many retail strip centers have been left without retail tenants. However, the vacancies are being filled up in most places by service-oriented businesses and restaurants.
“Strip centers will attract more of a service-type retailer,´ said Ed Stoner, president of Old Town Square Properties in Fort Collins. He explained that the convenience of the drive and parking is what makes strip centers more suitable for “in-and-out” types of businesses.
“When you go downtown you anticipate buying more than one thing,” he said.
According to Stoner, dress boutiques, gift shops, jewelry shops and the like are going to locate in a mall or a downtown area because of the foot traffic. When people have to park and walk a couple of blocks to get to a store, they are likely to linger and shop around.
In Greeley, out-of-state developers are taking advantage of the retail corridor trend. Centerplace, developed by Jacksonville, Fla.-based Regency Centers, and Greeley Commons, developed by Joseph Freed & Associates of Chicago, are both examples of the retail consolidation. Both centers are located on the U.S. Highway 34 Bypass, and both centers feature several big box stores as well as a mix of retail, restaurant and service.
“I’ve seen quite a trend over the past 30 years,´ said Fred Croci, managing broker for Wheeler Commercial Properties Services LLC. “Certain corridors are becoming retail corridors.”
Croci’s firm built Poudre Valley Plaza at the corner of Shields Street and Horsetooth Road in Fort Collins about nine years ago based on the premise that retail businesses would not dominate the space.
The plaza was built to accommodate service and restaurant businesses, with a two-story building instead of a traditional one-story strip.
He said that as retail has shifted from numerous small local stores to few large national stores, the day of the “mom and pop” retail strip center has ended. Retail is bigger and focused in lifestyle centers and around big box stores.
For small retail to survive outside of these retail corridors, according to Croci, they must be highly specialized. If consumers can only get an item from one place, or that place offers a special service with the product, that business is likely to succeed regardless of where it settles.
Croci has experience in these matters. He built Cimarron Plaza in Fort Collins in 1985. He said the plaza originally housed many retail businesses, but that is not the case now.
“There’s a trend of having to put service businesses in a retail environment to fill the space,” he said.
Not that there is anything wrong with that.
“In the end, real estate is a box that needs to be occupied,´ said Dave Veldman, president of Veldman Morgan Commercial Inc. He added that the strip centers are at an advantage because they can serve multiple purposes.
Veldman knows this song and dance all too well. His Raintree Village was built as a grocery-anchored shopping center. Instead of a King Soopers or Safeway, the center got a Pulse Aerobic and Fitness Center. And the rest followed.
“We don’t have a true retailer there,” he said. “How business is done has changed, and we have to change with it.”
This trend might seem negative, but Veldman said that the strip centers are doing well with their services and restaurants. The tenants get ample parking and good visibility and the landlords get tenants.
“There’s plenty of demand for that type of space,´ said Joe Palieri, employing broker for Loveland Commercial LLC.
While newer centers seem to attract the most retail, these centers are also more expensive and not affordable for small, locally based retail stores, he said. Many small or struggling retailers look for space in strip centers because it is cheaper than a mall or a center in a retail corridor.
Palieri is working on the continuing development at the Thompson Valley Town Centre in southwest Loveland. The center is anchored by a King Soopers and dominated by service and restaurants, but has several retail businesses as well, such as a Hallmark Gold Crown and a store selling kitchen supplies.
Palieri said the key for these centers is to keep tenants, and the key to keeping tenants is to keep up with maintenance on the building. He said the centers that are suffering the most are in need of a facelift. A responsible building owner or manager has no reason to have vacancies.