More than the Water Is Hot

Gilbert Garrett was mostly hoping for some retirement security and maybe a nice place to shop six years ago when he started evaluating 20 acres at the Highway 270/Highway 7 interchange at Hot Springs.

He got both — and more.

Garrett, 50, an excavation contractor turned developer, is putting the finishing touches on Hot Springs’ 450,000-SF Cornerstone Market Place, an outdoor mall that is one of the city’s biggest commercial developments in years with about 40 retailers.

There’s but one 15,000-SF storefront still available. Details are being nailed down for the June announcement of a new retailer for the last piece of developable land at Cornerstone, where a new 23,000-SF building will also go up.

“It taught me a lot because I was basically a rookie and had never done a retail project before,” said Garrett, who stitched together a batch of properties to grow the final site to about 40 acres. “I had no real connections in the retail world, although I had done some office and warehouse projects. I didn’t know we couldn’t do it.

“Cornerstone is a regional player now.”

Cornerstone — referred to as a “regional power center” in the mall industry — was among the first in a new wave of development that’s swept Hot Springs, especially west of Highway 270, along Highway 7. It’s left in its wake a smorgasbord of nationally and regionally branded retailers and restaurants hot for the town that decades ago mobsters nicknamed “Bubbles.”

Entrenched at Cornerstone are Old Navy, Books-A-Million, Lowe’s, Outback Steakhouse, PetCo, Belk, Office Depot, Goody’s Family Clothing, T.J. Maxx, Pier 1 Imports, On The Border, Cracker Barrel and others. On the way is a San Francisco Bread Co. shop.

In the 270/7 corridor are fairly recent arrivals such as Ruby Tuesday’s, but on the way is a drive-through Starbucks, a Chili’s restaurant and several smaller mall developments that promise a slew of new retail operations.

Besides retail development, the first office building at a new 90-acre high-tech business park near Hot Springs National Airport has gone up, and the area’s surging development intrigued Crye-Leike Realty, the country’s 10th largest real estate firm, to build a new office that will have nearly 50 agents.

Dillard’s Inc. launched a multi-million dollar expansion of its store at Hot Springs Mall, west of Cornerstone.

“People are discovering Hot Springs,” said Steve Arrison, director of the Hot Springs Advertising and Promotion Commission. “The growth out there is good for the whole city.”

Still, the growth is surprising for some.

“I don’t know why Hot Springs has been expanding,” said Bill Fuller, manager of Dillard’s at Hot Springs Mall. “But it just keeps going and going.”

According to Hot Springs Planning Department officials, 4,702 commercial and residential building permits were issued for work valued at about $298 million between January 2001 and the end of 2003. In 2003, new construction permits were pulled for three hotels or motels; 11 office, bank or professional buildings; and 70 stores, customer-service operations or strip malls.

“When you think about it, there’s so much that’s building and to build on,” said Willis Smith, of West Group LLC of Little Rock, which is finishing up Dogwood Landing on Highway 7. “It’s just a wait to see what else goes in.”

Crye-Leike Realty spent about $2 million buying land and building a 13,000-SF office building on Central Avenue (Highway 7), east of Highway 270.

The facility will open this month, with about 6,000 SF dedicated to Crye-Leike and the rest leased out at about $14.50 per SF.

“The market here is vibrant,” said Bob Benscoter, the office’s managing broker.

Malls

Garrett, who now is part-owner of Cornerstone property along with Lowe’s, Belk and Cooper Communities, said the outdoor mall was at first too small and the area’s demographics too unappealing for national retailers to notice.

“We were getting attention, but if they all couldn’t come then none would come,” Garrett said. “We had to have a large enough (site) for all of them to come — they feed and play off of each other’s strengths.”

“Early on,” he added, “we were turned down by Starbucks. They didn’t think the demographics supported us.”

The acquisition of 20 more acres for the mall — which helped push the total mall development cost to about $50 million — and a better demographics study, helped convince national retailers, Garrett said. Another 40 acres dedicated for a commercial office court sits behind Cornerstone ready for development. Cornerstone space leases for about $14 per SF.

The demographics study showed as much as 65 percent of disposable Garland County income was headed to Little Rock businesses, Garrett said. That soon changed.

Hamilton said that countywide retail sales in 1997 were about $261 million, which ballooned to $1.2 billion in 2000. Arrison said the city’s hamburger tax collections were up 10.3 percent in first-quarter 2004 after being up 2 percent in the same period last year.

“It’s actually one of the larger outdoor regional power centers in the area,” she said. “We were fortunate that Hot Springs was a little underdeveloped for retail. It’s been a boom.”

“It’s come in phases … getting the Lowe’s was a significant turning point. Once you get one, they come in a flock.”

Even Starbucks came around, albeit too late. The Belk was originally an Albertson’s store with a Starbucks. When it closed, the coffee colossus wanted to lease Cornerstone space but couldn’t due to an exclusivity clause held by a Joe Muggs coffee shop.

Old Navy’s 12,000-SF store did $12 million in sales its first year, Hamilton said. They want a bigger space but nothing is available.

T.J. Maxx did more business in its first day than store officials anticipated for the first week, Garrett said.

“They (all) found out that we were a great place to do business,” Garrett said.

Still, negotiating with national companies was a one-on-one chore of almost half a year, Garrett said.

“I’m not an economic developer,” said the Advertising and Promotion Commission’s Arrison. “But the national chains were hesitant, they looked at the surface and how do [they] get the value to sustain. We’ve seen success, and now they’re coming in.”

A Chili’s is under construction adjacent to Cornerstone, where a Gateway computer store had been.

Susan Austin, marketing director for Hot Springs Mall, said cosmetic renovation for the mall was set to begin this year.

Dillard’s meanwhile, spent about $5 million in 2003 adding 30,000 SF to its store at Hot Springs Mall, which brought it to just over 100,000 SF.

“The Dillards just thought we needed a bigger store,” said store manager Fuller, downplaying the expansion. “They had wanted to expand for several years and it came our time.”

He said other development in the area and Cornerstone didn’t spur the action or seem to challenge the store.

“Anything that goes just cuts the pie up,” Fuller said. “But we’ll hold our own.”

Austin played up the role of Hot Springs Mall as a development magnet.

“The mall, because of where it is, and the way Central Avenue has developed, has been a springboard for development in the South Highway 7 area,” Austin said. “I can’t say it’s been the catalyst, but it spearheaded development and it was a big part of the retail explosion.”

Dogwood

The West Group, which includes C.J. Cropper and a son as leasing agents, developed Dogwood Landing — site of the old Elks Lodge — on Highway 7 between Timbercrest Lane and Buena Vista Road, across the street from a Wal-Mart Supercenter.

Its first building, 11,550 SF, is about 95 percent complete after breaking ground in May 2003 and is expected to be completed by June 15, the West Group’s Smith said. It will house a Starbucks that opens June 1, and will add a Coldwell Banker Realtor office, an Alltel retail store, and four restaurants including Firehouse Subs and Ragin’ Cajun.

In 2005, they’ll finish a 33,000-SF building at the site. The 4.5-acre location will finish with a price tag of about $5.5 million. Rents will be in the $18-$21 per SF range.

“We’re generating Little Rock [commercial] rents,” Smith said. “It’s where you need to be in Hot Springs — on Highway 7. That’s where the activity is.

“Cornerstone probably started it.”

Tech Park

Just finished out by Hot Springs National Airport was a spec building in a 90-acre Technology Plaza. It’s 37,800-SF but can be bumped up to 64,000-SF.

It cost $1.1 million for construction, with build out pushing that to $2.8 million, said Jay Chessier, president and CEO of the Hot Springs Chamber of Commerce. Expansion would put the total cost at $4.75 million. Funding came through a loan to the Garland County Economic Development Corp., which is tied to the chamber.

The park is being marketed to technology-related businesses, to corporations as regional headquarters, and to biotechnology firms.

“We didn’t build it for someone who needs an extra 10,000-SF, but to attract new businesses to the area,” Chessier said.

It makes Hot Springs competitive on the national level with similar rival facilities. The city expects to do well because it can offer a good quality of life and schools, outdoor activities, lower cost housing than in many other parts of the country, and access to central Arkansas.

Although he wouldn’t name names, a new tenant is expected to commit soon. He said new businesses might also put up their own buildings.

The Surge

Several factors have contributed to the surge in development in Hot Springs and Garland County, according to business and civic leaders.

Two obvious factors are the reputation of Hot Springs and Hot Springs Village — which is partially in Garland County — as prime destinations for retirees from around the country, and as a trendy tourism spot.

The Advertising and Promotion Commission’s Arrison said about 2 million people visit Hot Springs annually for its festivals, conventions, natural beauty and quaint historic downtown.

Hot Springs’ population jumped to 35,750 in the 2000 U.S. Census — about 23.2 percent of those people were at least 65 years old — from 32,462 in the 1990 Census for a 10 percent gain. Hot Springs Village, which is in both Garland and Saline counties, jumped to 8,397 in the 2000 U.S. Census from 6,361, for a nearly one-third gain. Of the 2000 total, 56.6 percent were at least 65 years old.

Garland County, meanwhile, grew 20 percent, to 88,068 in the 2000 census, from 73,397 in 1990. Of that 2000 total, 18,652 (21.2 percent) were at least 65 years old.

An older population also leads to more medical and care facilities, which create more jobs for younger people, said Chessier. Other business development has also contributed to job growth.

“If you think about it, baby boomers are a big part of Hot Springs,” said Dogwood Landing’s Smith. “There are a lot of retirees, but it’s changing slowly.”

That adds up to a decline in median age to 42 and an increase in median income to nearly $47,000 (from about $26,000 in 1990) for Hot Springs and Garland County, according to a study prepared by University of Arkansas professors for the Cornerstone developers. Almost 73 percent of workers in the area have white collar jobs.

“The two together were a big boost to us,” said Roxanne Hamilton, director of leasing for Garrett Enterprises.

The area has a good mix of retirees and baby boomers who had or have good salaries, said the Chamber’s Chessier, and the Foundation for the Mid-South has rated Hot Springs among the top 20 economic areas in the country and the second-fastest growing in the state.

“A retiree is worth three manufacturing jobs, in terms of disposable income,” Chessier said.

Hot Springs developers also no longer sell Hot Springs as a provincial town. Instead, they push the city and county as part of a primary five-county trade area that includes Garland, Pike, Saline, Clark and Montgomery.

The pitch is that it caters to west Arkansans who are willing to make a drive to Hot Springs and opens up a 250,000-person market area, and a secondary trade area that includes most of the rest of west and southwest Arkansas.

Hot Springs’ classification as a Metropolitan Statistical Area also helped catch the eye of national retail chains, said Austin, the mall’s marketing director.

“Most (MSAs) have at least 100,000 people. So, we’re not quite there. But what folks don’t realize is that the service area has 250,000 people within 30 miles,” Chessier said.