Well-funded retailers want space for new stores, and developers are delivering that, usually in mixed-use developments that include luxury residential units and upscale offices and hotels.
“Depending on where the mixed-use is located, we see retail rent premiums [at] 15 percent to 25 percent above what one would expect in a given trade area,” said Ryan McCullough, a real estate economist at CoStar Portfolio Strategy, a Boston-based affiliate of CoStar Group. This year developers are set to deliver some 40 million square feet of class-A retail space throughout the U.S., up from the 25.3 million square feet that opened last year, according to JLL. Deliveries of general or freestanding class-A U.S. retail space will rise by roughly 50 percent, while shopping center deliveries are set to nearly double.
A downtown parking lot in Dallas will become Field Street District
Houston will see the largest share of new class-A retail; developers anticipate opening some 4.1 million square feet this year, much of it in mixed-use projects. Roughly 20 such projects are under construction, in planning, or have been recently delivered within the Inner Loop alone, according to JLL. In the suburb of Magnolia Park, for example, Stratus Properties is building a 120-acre mixed-use project with about 40,000 square feet of retail, including an HEB grocery store. And GID Development Group is building a 600-unit multifamily complex with 50,000 square feet of ground-level retail near River Oaks. Several other major mixed-use projects, including MKT, in Houston Heights, are scheduled to open this year.
Dallas, meanwhile, is on track to generate some 3.7 million square feet of class-A retail this year. A joint venture comprising Dundon Capital Partners, Kaizen Development Partners and Woods Capital has plans to turn a downtown parking lot into a $1 billion, 2 million-square-foot mixed-use neighborhood called Field Street District. This is to include five office, residential and hospitality towers. Roughly 50,000 square feet of street-level retail and restaurants will take shape in one tower alone.
Suburban malls, too, are getting mixed-use makeovers. Beck Ventures is converting the former Valley View Center Mall into a mixed-use complex now called Dallas Midtown, with 60,000 square feet of retail, plus luxury residence, hotel and office space. And Plano’s Collin Creek Mall will become a mixed-use center with 300,000 square feet of open-air retail space, 200,000 square feet of entertainment and services, 40,000 square feet of restaurants, 1.3 million square feet of offices and a 200-room luxury hotel.
Meanwhile, in Washington, D.C., upscale development abounds. Developers are planning some 2.6 million square feet of new prime retail in the market, JLL reports. Whole Foods will open a 40,000-square-foot store at The Hartley apartment building, within The Parks at Walter Reed. The Parks is a 3.1 million-square-foot mixed-use development from Hines, Triden Development Group and Urban Atlantic.
Brookfield, JBG Smith, Kimco Realty and LCOR are all working on separate mixed-use developments, including retail, not far from the new Amazon.com headquarters, near National Landing. Edens is planning a 586,000-square-foot mixed-use property with roughly 360 residential units plus office space and ground-floor retail in the Union Market neighborhood.
Ivy Station, in Culver City, Calif., will offer 50,000 square feet of ground-floor retail
Los Angeles, and Tampa, Fla., each have about 2.3 million square feet of class-A retail space on deck, JLL reports.
CIM Group is to build a five-level, 2.6-acre mixed-use property in the Sawtelle district of Los Angeles, with 16,600 square feet of ground-floor retail and 154 apartment units. Developers AECOM–Canyon Partners and Lowe Enterprises have announced the first specialty restaurants, cafés, retailers and services for the 50,000 square feet of ground-floor retail space at the Ivy Station mixed-use development they are building adjacent to the Los Angeles Metro’s Expo Line station in Culver City. Ivy Station will include a 240,000-square-foot office tower and a 148-room hotel.
In downtown Tampa, Strategic Property Partners is transforming the former Channelside Bay Plaza shopping center into the $3 billion Sparkman Wharf complex. The $3 billion Water Street and the 22-acre Midtown Tampa developments, too, are bringing thousands of square feet of retail space to the market, including a 22,500-square-foot REI store that will co-tenant the base of an office tower with Whole Foods.
“The fact that these projects finally broke ground is especially significant, because the Tampa area had not seen any new mixed-use developments in years,” said Brian Bern, senior director of retail leasing business development at Franklin Street. “Developers are also building similar mixed-use properties in the trendy Hyde Park and Seminole Heights neighborhoods. We expect to see traditional mall retailers consider moves to up-and-coming mixed-use locations with potential for higher foot traffic.”
By Brannon Boswell