Challenging Year for Retail Development (Commentary by by Steve Lane)

Nationwide, the shopping center development market has entered a challenging period, with many players in the business facing difficulty.

The collapse of the housing market, together with higher fuel and food prices has placed a tremendous strain on the consumer and driven retail sales down.

As a result, retailers have pulled back on expansion plans and become very cautious about future growth.

This has affected all involved with the shopping center industry.

This year will likely see the largest number of retailers ever to close stores, pull back on expansion or announce bankruptcy. 

The list includes such marquee names as Starbucks, Krispy Kreme, Ann Taylor and Sharper Image, and other well known retailers such as Hollywood Video, CompUSA, Friedman’s Jewelers and Linens ‘N’ Things.

Many furniture and home improvement stores, such as Ethan Allen and Home Depot, are suffering from the slowdown in new housing construction.

Despite this negative news, several new retail developments are moving forward around Arkansas.

Target is scheduled to open in October along with many other retailers in a new power center in Fort Smith. 

A new Kohl’s-anchored center is proposed in Russellville. In Little Rock, Target is in talks to locate on the former University Mall property.

Farther west, Shackleford Crossing opened at Interstate 430 and Shackelford, with JC Penney, Babies ‘R’ Us and a Wal-Mart Supercenter under construction.

Another new lifestyle center, the Promenade at Chenal, will open this year with an upscale store lineup.

In Jonesboro, Indian Mall is planned to be redeveloped into a lifestyle center.

In Northwest Arkansas, many projects are under way.

In Benton County, construction has begun on a new Target-anchored shopping center near Pinnacle Hills Promenade.

Grocery and other retail is planned on the west of Interstate 540 around the new Promenade Boulevard interchange.

Expect to continue to see new shops and restaurants fill in around the Pinnacle Hills area. Pleasant Crossing has been “relaunched” as a mixed-use center, with additional shops, office and restaurants planned.

In Washington County, retail development continues to be focused around the Northwest Arkansas Mall.

The opening of the Malco Theater in late 2007 has served as a catalyst for additional development in Steele Crossing, and this pattern should continue.

In south Fayetteville, the Sixth Street corridor near the University of Arkansas campus is evolving with new restaurants and shops. 

And the opening of Arvest Ballpark should serve as an engine for retail development in Springdale west of I-540.

Reports from the International Council of Shopping Centers’ RECon conference in Las Vegas in May were varied, although there seemed to be a general consensus that business will be more difficult for at least the coming two years.

Other observations from RECon:

• Vacant spaces will generally be harder to fill.
• Poorly conceived centers, especially lifestyle centers, will likely have more problems than in the past.
• Activity will trend toward “infill” development in larger metro areas and redevelopment of existing centers, rather than new shopping center construction.

The Northwest Arkansas market should remain relatively strong, given our sustained population and job growth.

With these favorable conditions, Northwest Arkansas is an attractive opportunity for retailers still looking to expand, and well-located shopping centers should continue to attract quality tenants.

(Steven P. Lane is a principal with Colliers International specializing in retail tenant representation. He can be reached at (479) 636-9000.)