Renovated strip shopping centers compete in retail market.
In particular, strip centers, which have been a mainstay in the market for more than four decades, are undergoing a renaissance, with many renovations taking place to bring older centers into the 21st century. The changes are due in part to the evolving shopping habits of people, who have less time than ever to spend at the regional mall.
Another factor is the current financial crises being experienced by many general merchandise tenants which have traditionally located in strip centers. As a result, the neighborhood and community shopping centers are re-directing their leasing and marketing focus.
In the context of this evolution, strip centers are re-assessing their mix of tenants, their place in the market and how to maximize their value. Many are investing in major renovations to help them compete now and in the future.
For example, Levin Management Corporation recently completed a multi-million dollar renovation at Fair Ground Plaza, a 180,000 square-foot community shopping center. Originally developed in 1958 in Mount Holly, NJ, the center is located two miles from the New Jersey Turnpike, Exit 5, on County Road 541/High Street. A major component of the upgrade is the widening of High Street/County Road 541 and the creation of a new left turn lane which allows controlled, direct entry to the shopping center. At the same time, ACME Supermarkets, a tenant at the complex since the early 1970's, has expanded and relocated on-site within the complex. The new 64,000 square-foot combination supermarket and drug store is the largest store in the ACME chain.
Despite the competition, strips offer a number of definite advantages for a targeted group of retailers and their customers. Topping the list are rental rates that are about one-third lower than regional malls. In addition, strip centers are usually conveniently located on well-traveled roads and afford tenants a strong identity that is etched into the minds of every driver who passes by The proximity of parking is also a benefit high on the list of shopper priorities.
While the enclosed regional mall is a destination for a different kind of shopping expedition, it serves as a magnet for neighboring strip centers. Centers located near regional malls benefit from the larger retail environment. In this context, the best locations are on the mall's perimeter or directly across the street.
But today's strip center landlord needs to be realistic and adjust the tenant merchandise mix accordingly in order to survive. Rather than target leasing to department stores, apparel and jewelry retailers that do better in a mall setting, the strips appeal to supermarkets, home improvement stores, book stores and service retailers.
In most cases, a supermarket is the best anchor tenant for a strip center. Today's supermarket offers much more to consumers than in the past, and most require major renovations to compete. Typically, a supermarket will spend $50 to $60 per square foot to renovate its space. However, it is the landlord's responsibility to create a more attractive environment, updated image and look to the shopping center. The landlord must be able to assemble space to accommodate large supermarkets and other big box stores to enable them to compete with power centers. They must provide a financially sound, well-anchored center that attracts a mix of retailers - toys, pet foods, books, sporting goods, automotive parts and services.
A Changing Industry
Generally, shopping center developers react to retail demands and industry trends. This is a key to survival. Developers compete with one another to be able to offer retailers what they want.
For example, power centers arrived in the mid- to late-80's and many include long-term leases that shape the design of the center. Landlords must wait on the sidelines, but any shake-outs can create new opportunities. To stay ahead they must keep on top of market trends and maintain the willingness and resources to make a renovation investment that keeps pace with demand.
In essence, strip centers have become part of the fabric of our society, inherent to patterns of our lifestyle and interwoven into the community. As a result, while strips need to revamp to compete, they are here to stay.
Steve Felix has 20 years of experience in the area of real estate marketing, leasing, property management and consulting. He serves as director of management marketing for Levitt Management Corporation. The company serves as managing agent for some 54 properties totalling 6.5 million square feet. Primarily located in the tri-state region, they range from strip centers to power centers.
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|Title Annotation:||Annual Review and Forecast|
|Publication:||Real Estate Weekly|
|Date:||Jan 31, 1996|
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