Developers of a new shopping center here say they are receiving positive responses from major retailers about opening stores there.
Kenneth Katz of Houston-based developer Baker Katz said the company is “actively negotiating with a number of major retailers and working through a lot of details with them.”
Baker Katz is developing 35 acres at the intersection of Chappell Hill Street and U.S. 290 access roads, planning to construct a 200,000 square-foot shopping center there.
Katz said that no lease agreements have been finalized.
“Retailers are so sensitive to any information getting out about their plans until they’re finalized,” he said. “But the response has been very good.
“Brenham is a market that I think a lot of major retailers have had some degree of interest in. As the market continues to mature and develop, that level of interest has continued to increase.
“Retailers are pleased to see that this site represents an opportunity to them, given its proximity to all the major retail that’s already at the intersection of (U.S.) 290 and (Highway) 36.”
Site work has been underway for several months.
“We are moving a lot of dirt,” said Katz. “In order to get it into condition where it can be developed, we’ve got some topography issues that we have to work through.
“So it’ll take a number of months to get the site in a condition where we can really start building on it.”
There will be periods, he said, when no work will be done on the site.
“We’ve got an extensive amount of fill (work), where we have to put extra dirt. And those areas need to rest for a period of months while that dirt settles and compacts and gets to a point where you can build on it,” said Katz. “There will be a period of time when the dirt work just stops and nothing happens on the site for months.”
The city of Brenham and Washington County commissioners agreed to a portion of their sales tax revenues from businesses in the new shopping center, up to $6 million over a 12-year period, to the developer.
The city has also agreed to about $2 million in infrastructure and traffic improvements.
The agreement includes a July 1, 2021 deadline for Baker Katz to present a “certificate of occupancy” for its first tenant. A certain percentage of tenants must be considered national retailers.
Katz said development is “very much in line with our expectations.”
By Arthur Hahn
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Academy Sports + Outdoors on Monday opened a store in Richmond with a revamped floor layout and design, part of the Katy athletic retailer’s initiative to improve customers’ shopping experience amid increasing brick-and-mortar and online competition.
The 63,000-square-foot store, off the Grand Parkway near the fast-growing Aliana master-planned community, features a wood and stone exterior meant to evoke the great outdoors. Inside, customers are greeted by curated merchandising displays, such as a tailgate party theme showcasing Igloo coolers, a portable grill, a cornhole set and mannequins wearing Houston Texans jerseys.
“We’re doing a lot more storytelling,” said Sam Johnson, Academy’s executive vice president of retail operations. “We want to create an emotional experience for our customers.”
Academy, one of the largest sporting goods retailers nationally, is increasingly focused on elevating its store experience to attract customers amid mounting competition from retailers such as Amazon, Target and Walmart. Academy, in particular, has been in fierce competition with Dick’s Sporting Goods after the Pennsylvania-based retailer entered the Houston market in 2016 and quickly opened 16 stores.
“Dick’s dropped almost 1 million square feet seemingly overnight,” said Jason Baker, a retail broker with Houston-based Baker Katz. “That’s a meaningful amount of real estate. Academy is thinking, ‘We’ve got to differentiate ourselves,’ and this is an attempt to do that.”
Responding to competition
Academy, known for its wide product selection and lower prices, is refreshing many of its more than 245 stores nationally, including 32 in the Houston area, to stay competitive. The retailer, owned by New York-based private-equity firm KKR, reported revenue of $4.8 billion in 2018, flat from the previous year.
In the new store concept, Academy has moved its merchandise around to create a more logical flow, allowing customers to walk from fishing to camping to grilling to hunting gear. Universal products, such as athletic apparel and footwear, are displayed front and center, while specialty products, such as firearms and sporting equipment, were relocated to the back corners. Some sections, such as those showcasing camouflage and grills, will be changed out seasonally to encourage repeat customers.
On HoustonChronicle.com: Academy Sports focused on store experience
Academy also grouped similar products and is showcasing more of its apparel on mannequins and special display shelves to drive sales. The Richmond store has 15 percent less inventory than typical Academy stores, but executives expect to sell through its merchandise 15 percent more quickly.
The company has also installed shorter shelves and replaced hanging signs with large wall-mounted ones to create a more open, airy feel. The Richmond store has are nearly 30 skylights and windows as well as LED lights to brighten the interior.
“Sometimes our stores felt a little cluttered inside, like it was a store of signs,” Johnson said. “We want our product to tell the story.”
Further training, offerings
The changes at Academy aren’t just cosmetic. The retailer is also investing in customer service and e-commerce to boost sales.
The Richmond store will employ more than 70 employees, called “enthusiasts,” who will each receive 50 additional hours of training in customer service. For example, employees in Academy’s fishing department will receive training from local fishing experts and vendors so they can recommend the best bait to use in local lakes.
Academy earlier this summer rolled out its “buy online, pick up in store” service, looking to convert some of its online traffic into foot traffic. The retailer is also installing a new digital queuing technology in some of its stores to hasten checkout times.
On HoustonChronicle.com: Academy Sports to expand amid challenging retail market
Earlier this year, Academy launched its first branded credit card, offering a 5 percent discount to loyal customers. The retailer will allow in-store customers to purchase out-of-stock items online with free shipping.
Academy plans to use its new store as a lab to test new merchandise and retail displays, which can be used to inform future stores and remodels. The retailer is on track to open eight stores nationally this year, including the Richmond store, 19150 West Bellfort Blvd.
“We want to create a better experience across the whole store to make Academy a more interesting place to shop,” Academy Chief Executive Ken Hicks said in June. “We’ve got a strong customer base. Our job is to grow it and make sure people keep coming back.”
By Paul Takahashi
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A persistent need for a tenant mix that is resistant to e-commerce and which facilitates a unique, authentic experience is prompting owners of older retail centers and malls to assume high levels of risk and redevelop their properties.
While there can be a plethora of non-tenant-related factors that spur redevelopment projects — the basic need to charge higher rents, the structural and aesthetic deterioration over time, a desire to restore a public perception of vibrancy — the ultimate success of almost every retail redevelopment project hinges on the tenancy.
For shopping centers, this typically entails adding more restaurant users and other retail categories that offer a critical service or a unique shopping experience, as well as integrating open recreational spaces. For malls, adding entertainment uses is becoming increasingly important, particularly when an anchor space has been vacated or sold back to the owner.
When paired with a telltale sign like sluggish sales and/or negative rent growth, any of the aforementioned factors can be the catalyst for pulling the trigger on a redevelopment project. But whatever the impetus for the project, without marketing to and leasing tenants that can afford market-rate rents, align with the surrounding demographics and drive foot traffic throughout the property, it’s all for naught.
In this sense, retail in 2019 is about so much more than location, traffic counts and demographics within a certain radius. And for their part, tenants in today’s market are also highly attuned to much more than just these traditional metrics, says Ben Brown, a tenant rep specialist at Houston-based Baker Katz.
“More so today than ever before, tenants are very concerned with their settings in terms of how they build their brands, install their signage, facilitate access from major arteries and mesh with their co-tenants,” says Brown. “So it’s critical to enhance the property from an aesthetic perspective to bring in the best-in-class tenants and be able to charge the maximum amount of rent.”
Last winter, Baker Katz purchased the 850,000-square-foot PlazAmericas Mall in Houston, an enclosed shopping and dining destination that was built in 1961. As the property has already been renovated several times over the years, the company is focusing on improving the tenant roster and boosting occupancy, which was at about 70 percent at the time of acquisition.
Fidelis Realty Partners, which recently broke ground on the redevelopment of the 1.1 million-square-foot San Jacinto Mall in nearby Baytown, uses an acronym to identify key focal points beyond the actual shop space. That term is “VAPS,” which stands for visibility, access, parking and signage.
“In redevelopment scenarios, you typically have a mall or center that has been declining for many years,” says R. Carson Wilson IV, vice president of leasing at Fidelis. “One of the biggest challenges is to change the public perception and convince prospective merchants that your vision for the redevelopment is real and attainable. In that sense, these features are critical aspects of any successful project.”
But every retail redevelopment project carries risk, perhaps even more so in the age of e-commerce. In financing these deals, lenders of course look closely at a firm’s track record of executing similar projects, as well as how underwritten rents compare to market rates. But in addition to these commonly scrutinized variables, visual aids and proof of positive leasing activity can also go a long way.
“When presenting a redevelopment project, it’s important to communicate that you understand all the potential moving pieces,” says Ash Thakore, investor reporting associate at Houston-based Williamsburg Enterprises. “If lenders don’t understand or follow your vision, they will be unwilling to lend on the project. Renderings and proof of interest, such as letters of intent or signed leases, add a level of assurance that the project will be successful.”
Williamsburg recently completed the redevelopment of North Cypress Landing, a 70,000-square-foot center in metro Houston that was originally built to house a Randall’s grocery store. Williamsburg executed leases with Star Mattress & Furniture and Landmark Industries within four months of starting the project, bringing the property to full occupancy in the process.
While the actual execution of a project does not affect prospective tenants, current tenants that plan to remain at the center post-completion can certainly be impacted by construction. Working closely with these users before ground breaks can make for a much smoother transition, says Weldon Simons, COO of Weitzman.
“With any redevelopment, you have to work beforehand with existing tenants to get them on board with the project,” says Simons. “In many cases, your challenge is to show tenants how the center will be improved and how it can help them reach their target customers.”
Neal Wade, a Baker Katz associate who specializes in retail acquisitions and development, notes that construction of existing properties can create significant logistical challenges for tenants as well.
“A big challenge with redevelopment projects is keeping tenants open and getting customers in and out of the center safely while construction is ongoing,” says Wade. “You want to minimize disruptions to tenants, but sometimes you have to cut utilities or redirect traffic through a plywood tunnel to protect shoppers from debris. At the same time, you have to keep signage up so customers will know the center is still open for business. It’s definitely a short-term pain for tenants.”
Wade says that landlords will sometimes abate or discount rents during construction months to compensate for lower traffic and sales. But either way, it’s critical to keep tenants in the loop on timelines and objectives for the project.
Simons adds that rising costs of construction materials and labor still impact budgets for redevelopments, which are typically smaller in scope than ground-up projects. But when you tackle everything from parking to landscaping to signage, those costs can add up quickly.
Weitzman is leading more than a dozen redevelopment projects throughout the metroplex. These include the 120,000-square-foot Irving Towne Center, the 330,000-square-foot Grapevine Towne Center and the 157,000-square-foor Fielder Plaza in Arlington.
Construction teams can run into other problems that are simply a factor of the property’s age, says Jason Ford, president and COO of Williamsburg.
“In our experience, some of the biggest challenges for redevelopment are related to the lack of and inaccuracy of existing building plans,” he says. “Older properties may have been modified multiple times over the years for various tenants, and without accurate records of previous changes, unforeseen issues are bound to arise.”
To some degree, all facets of retail redevelopment projects are undertaken to attract and build the ideal mix of tenants for that neighborhood. Disrupting or modifying in-place leases adds another layer of complexity to redevelopment deals
“Another challenge with redevelopment projects centers on varying lease expirations,” says Ford. “This can result in owners having to buy out tenants, operate with varied tenant mixes during the phased redevelopment or wait for leases to expire before starting the project.”
Landlords must manage these obstacles on the leasing front while also recruiting new tenants that can afford the higher rents that the center must inevitably command following the redevelopment. In the core retail markets of major Texas cities, where vacancy rates are below 10 percent, this can be even more challenging. But it’s the key to adding value to the project, sources concur.
Preleasing, in particular, can go a long way in helping retail landlords obtain favorable terms on any construction loans needed to finance a project. Providing evidence of in-place cash flows once the project is completed can also help mitigate some of the hurdles with regard to both leasing and financing.
A Team Effort
Retail redevelopment projects can run the gamut in terms of their size and scope, but the element of teamwork underlies all of them. Effective communication and collaboration between the many different parties involved in a project is critical to managing timelines and budgets.
“Working with great architects and general contractors who have experience with similar projects is the biggest key to overcoming the challenges of redevelopment,” says Simons of Weitzman. “Redevelopment projects present different obstacles than ground-up construction, and it takes a talented team of designers, contractors and in-house staff to make a vision a reality.”
To that end, developers and landlords must be able to clearly articulate their vision for a redevelopment project to all necessary parties, including municipalities, which are often heavily involved in redevelopment projects. They must also be able to tailor their language to the specific area of expertise of each company involved and keep the needs of current and prospective tenants at the top of their minds.
“Perhaps the most important factor to consider in a redevelopment is whether you have the right team in place to execute the plan,” says Thakore of Williamsburg. “Architects, engineers, leasing agents, lenders, property managers — these are all key roles, and one weak link can cause the project to experience significant delays or cost overruns that will quickly eat into projected profits.”
By Taylor Williams.
This article first appeared in the August 2019 issue of Texas Real Estate
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Bellaire Town Center, a redevelopment project of SDI Realty Advisors under construction at Bellaire Boulevard and South Rice Avenue, has signed Salata and JuiceLand as its latest tenants. Salata, represented by Wade Greene of Transwestern, signed a 2,804-square-foot lease. JuiceLand, represented by Chris Reyes and Tyler Trevino of Shop Cos., will occupy a 1,292-square-foot space. Brooks Shanklin and Josh Jacobs of Edge Realty Partners represented the landlord in the deals. Spanning two stories, the Bellaire Town Center retail and office development is home to Costa Brava Bistro, Dream Dinners, Lemongrass Cafe and Coldwell Banker United. Future tenants include Mod Pizza, Jersey Mike’s Subs, Spenga, Club Pilates, Phenix Salon Suites, a nail salon, a dental office and an orthodontist office. The new tenants will open in spring 2020.
Taste of Greek, a food truck operated by Altin Mulla on Northpark Drive in Kingwood, leased 1,200 square feet at Kings Crossing in Kingwood, Weingarten Realty announced. Kings Crossing is a Randall’s grocery-anchored shopping center at West Lake Houston Parkway and Kingwood Drive. Christi Davis of Weingarten Realty represented the landlord in-house.
NaturalPawz, a pet store chain that’s operated in Texas since 2005, is expanding following its acquisition by Independent Pet Partners in 2018, retail brokerage Baker Katz announced. A 4,000-square-foot store recently opened at 208 Westheimer. Ryan Neyland of Davis Commercial represented the landlord there. A 3,180-square foot store at Main Street Kingwood is planned to open at 2529 Kingwood Drive in the fourth quarter. Jazz Hamilton of CBRE represented the landlord. A 4,000-square-foot store at the Shops at Tanglewood, at 5702 San Felipe, will consolidate nearby locations at Sage Plaza and Woodway Collection in the fourth quarter. Brooks Shanklin and Josh Jacobs of Edge Realty Advisors represented the landlord.. The 4,008-square-foot store at Washington Central, at 4015 Washington Ave., is planned for the second quarter of 2020. Ashley Strickland and Nick Ramsey of NewQuest Properties represented the landlord. Ben Brown of Baker Katz represented Natural Pawz in each of the deals.
Mathnasium, a math tutoring center for students from kindergarten through grade 12, has leased 1,200 square feet in the Cypress Green Shopping Center, a development by Cyplot LLC on Cypresswood Drive at 230 Cypresswood Drive in Spring. Karol Snyder of Moseley Commercial Real Estate represented the landlord. Wes Miller of Wulfe & Co. represented the tenant.
Natural Wellness, a health and wellness store, leased 1,050 square feet in the Atascocita Plaza Shopping center at FM 1960 East in Humble. Kristen Barker of Wulfe & Co. represented the landlord.
Metcalf Fine Art Portraits leased 2,654 square feet in River Oaks Shopping Center, at 1934 W. Gray St., for relocation from Katy this fall. The studio is locally owned and operated by Nena Metcalf. Christi Davis with Weingarten Realty and Jenny Mueller with JLL represented the landlord, Weingarten Realty. Chris Reyes with Shop Cos. represented the tenant.
Jolly Jolly Bakery leased 1,500 square feet at Corrigan Plaza, 5402 Broadway, Pearland. Benny Nguyen and Jim Thompson of Retail Solutions represented the landlord.
Dog Haus Biergarten has leased 2,167 square feet at 8422 Highway 6 North. Benny Nguyen and David Burrgraaf of Retail Solutions represented the tenant.
Cross Creek Town Center, a mixed-use development by The Woodlands-based Marcel in Fulshear’s Cross Creek Ranch community, has signed new tenants: Sammy’s Sports Grill, 5,050 square feet; Experience Infusion Center, 12,300 square feet; and F45 gym, 2,500 square feet. Additionally, Apex Executive Suites, a coworking concept by Marcel, will occupy 14,410 square-feet of office space. Planned to open in the spring, the center will contain more than 76,000 square-feet of combined office and retail space. Lacee Jacobs and Laura Harness of CBRE represented the landlord.
By Katherine Feser
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