Economy & Economic Development  May 7, 2010

New retail developments on hold shelf for now

The Centerra development has had a significant sales tax impact on Loveland’s total share of the retail market in Northern Colorado, while Front Range Village has resulted in share shifts within Fort Collins.

According to a new study released by the Everitt Real Estate Center, when the Promenade Shops at Centerra opened in 2005 the city of Loveland gained, and maintained, a significant piece of the retail market share in Boulder, Larimer and Weld counties. From late 2005 through early 2008, Loveland’s share of the retail market climbed several percentage points to land and hover just above 10 percent. During that same period, other major cities in the region have experienced a steady slide in market share.

The shift-share analysis is the first done for the Northern Colorado retail market, according to Everitt Center Director Steve Laposa. Laposa started gathering data for the study, with the help of students Chris Hannum and Austin Carter, in February. The team relied on the municipalities to provide sub-market data with overall retail sales information coming from the Colorado Department of Revenue. Armed with data spanning the 10-year period from the second quarter of 1999 through 2009, they crunched numbers on a regional, municipal and inter-municipal level. The initial results of the study were presented at the Northern Colorado Commercial Association of Realtors meeting on April 28 at the Embassy Suites Loveland.

The impact of the Promenade Shops probably didn’t come as a surprise for the meeting attendees, as it didn’t for the study authors.

“That had to do with timing,” Laposa said.

In 2005, regional retail sales were about to start an upward climb that would last until 2008. At the time the Promenade Shops opened, just in time for the 2005 holiday shopping season, the total retail sales pie was smaller than it is today. Therefore, shifts in market share were more noticeable.

“Our (retail sales) pie got pretty big, but it’s not getting any bigger for now,” Laposa said.

Laposa pointed out that without steady population/income growth in the region, the retail race is a zero-sum game – for one to win, another must lose.

Front Range Village shift local, not regional

Though the data is limited by the short time Front Range Village has been open, its impact appears to be limited to a shift within the city of Fort Collins rather than the region. The Everitt report shows that while its opening by Alabama-based Bayer Properties LLC in 2008 appears to have had little impact on market share outside of Fort Collins, it has taken a chunk out of retail in midtown area of the city.

The report showed that the midtown area – including the Foothills Mall – saw its 2005 Fort Collins market share of 45.4 percent decline by 1.3 percentage points with the opening of the Promenade Shops and an additional 2.09 percentage points with Front Range Village.

Even with the shifts within the market, Larimer County as a whole hasn’t seen much change in its share for all of Northern Colorado over the past 10 years. Weld County gained market share from 2001 through 2007, while Boulder County declined during that period.

“I think we’re shuffling the deck chairs, but we’re not on the Titanic,” Laposa said, pointing out that retail sales and vacancy rates in Northern Colorado are relatively healthy compared to some markets. “When you look at the vacancy rates we have here, it’s not as bad as other places (around the country).”

“We’re seeing consistency in all of our projects except in Nevada, which has been hard hit,´ said Libby Lastner, executive vice president of retail development for Bayer.

Lastner joined a panel of local and national retail experts at the NCCAR meeting. She explained that the basic trends in retail development are the same across the nation: Big chains have pulled back on plans and there isn’t much expansion in the specialty retail realm, especially apparel. Alan Ginsborg, president of NewMark Merrill Mountain States, agreed that the local market is faring well.

“Colorado is probably more stable than what I see in Southern California,” he said.

Stability is also relative, pointed out Tom Castle with Sullivan Hayes. Along the Front Range, his firm is listing about 4 million square feet in anchor and junior-anchor positions. Additionally, sellers are dealing with schizophrenic comps ranging from $30 to $350 per square foot.

“To say the least, the market is unstable,” he said, adding that there is a silver lining in Colorado retail sales numbers. “We think we’ve seen the bottom.”

Panelist Ron Kuehl, vice president of real estate for McWhinney, added that the Centerra development sales were flat over the past year but they have picked up in recent months.

The panel went on to discuss issues with absorption, financing and tenant solvency that will likely lead to structural changes in the development industry going forward. All of the panelists admitted that retail development is just not going to occur in the foreseeable future except for niche projects.

“Retail development is dead,” Lastner said, adding that Bayer is now focused on the office market. “We do believe it will come back, albeit smaller and different.”

The Centerra development has had a significant sales tax impact on Loveland’s total share of the retail market in Northern Colorado, while Front Range Village has resulted in share shifts within Fort Collins.

According to a new study released by the Everitt Real Estate Center, when the Promenade Shops at Centerra opened in 2005 the city of Loveland gained, and maintained, a significant piece of the retail market share in Boulder, Larimer and Weld counties. From late 2005 through early 2008, Loveland’s share of the retail market climbed several percentage points to land and hover just above 10…

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