E.V. shopping centers desperately seeking tenants - East Valley Tribune: News

E.V. shopping centers desperately seeking tenants

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Posted: Saturday, January 16, 2010 6:03 pm | Updated: 3:47 am, Sat Oct 8, 2011.

Smaller retailers at Greenfield Plaza counted on Bashas’ to bring steady traffic to the center at Greenfield and Baseline roads in Gilbert. Since the Bashas’ store closed last July, traffic has slowed considerably and the parking lot remains mostly empty.

Hakchong Kim, owner of Kim’s Magic Touch Cleaners, said the supermarket provided a steady flow of customers stopping by to drop off or pick up their dry cleaning.

“After Bashas’ closed, they had to go to another place for their shopping, Fry’s or Walmarts, so not much (reason) to stop over here,” Kim said. “It’s hard. Dry cleaning is a plant and it’s hard to move out ...it’s going to cost too much to move the plant (somewhere else).”

Shopping centers across the East Valley are desperate for tenants as 2009 marked the retail market’s worst year in nearly two decades, according commercial real estate brokerage CB Richard Ellis. The Valley ended the year with 1.1 million square feet of vacated retail space, with 89 percent, or 983,665 square feet, of that space in the East Valley.

Greenfield Plaza is now about 75 percent vacant, said Jake Danovic, senior retail specialist for Rein & Grossoehme. He’s charged with trying to fill the space vacated by Bashas’.

“It was the hub of the center,” he said. “Goal No. 1 is to get someone back in that space to support our current clients and attract new ones.”

In Chandler, the loss of an Albertson’s at Chandler Marketplace has been a crushing blow to smaller tenants of the center, at Alma School and Ray roads. A portion of the vacated space was occupied for more than a year by dd’s Discount, an offshoot of Ross, then it, too, shut down.

“When there’s no anchor, which is a daily draw for those (smaller tenants), it’s just devastating for them and they can’t survive without the draw of that anchor for the most part,” said RED Realty Advisors’ Michael Clark, who is trying to find a replacement tenant or tenants for the vacated big box. “The challenge is really there’s lots of competition, very few users and lots of opportunities,” he said.

De Rito Partners Inc. handles leasing and sales for more than 175 retail properties. Morey Fischel, designated broker/manager, said vacancies are widespread and tenants are “hard to come by.”

“Many of those centers, particularly the unanchored strip centers, are filled usually with independent retailers, and it’s very, very difficult for independent people to find financing to go into business and stay in a business,” he said.

DISCOUNT AND DOLLAR STORES

Mesa Pavilions, at Southern Avenue and Power Road, includes vacant space that used to house a Costco, a Stool & Dinette Factory and other retailers. Kimco Realty, which handles leasing of the center, couldn’t be reached for comment.

However, finding a new tenant for the former Costco site is being handled by Phoenix Commercial Advisors.

Costco vacated Mesa Pavilions 16 months ago when it opened a new store at Sossaman Road and the U.S. 60, said Greg Laing, a principal at Phoenix Commercial Advisors.

“We had a contract two months after Costco closed with a retailer that was looking to enter the Arizona market, and they changed their mind,” he said. “It was off the market ... for four months, and, of course, when it went back out to the market, it was probably the worst market in history. So it sat around a little bit.”

After a long wait, a national retailer recently signed a purchase contract on the former Costco site and is now conducting its due diligence, obtaining city permits and signage assurances, Laing said.

“It’s three or four months away from (the deal being final),” he said.

Discount and used-items chains have been filling some of the anchor space vacated by retailers, Fischel said.

“Probably the most robust segment of the retail market right now are the discount and dollar store operators,” he said. “They’re going to take advantage of not only lower (lease) rates, but some better real estate because you’re going to see some owners that are now willing to look at some uses that, before, they wouldn’t have thought to do. Now they’re saying these discounters, these second-generation users, are viable.”

Neil Board, senior associate of SRS Real Estate Partners, is working on behalf of Ross to find another occupant for the space vacated by dd’s Discount at Chandler Marketplace.

“We’ve had to look at alternative uses ... marketing it to maybe a charter school, an urgent care or some kind of out-of-the-box retail use,” he said. “The discounters are doing a lot of deals right now, but there’s a Goodwill store across the street.”

SIGNS OF LIFE

In addition to a possible new retailer to replace Costco at Mesa Pavilions, activity at other centers indicates gradual improvement is on the horizon.

For instance, Fresh & Easy has signed a lease to open a store at Cornerstone at Queen Creek, a shopping center at Rittenhouse and Ocotillo roads.

“Cornerstone at Queen Creek is not too bad,” Laing said. “We’ve got some additional shops and (smaller, stand-alone spaces bordering the street) we’ve got to do in the first phase, but there’s quite a bit of activity. The project itself is going on two years old now and it’s just a matter of plugging along. You only have so many retailers. It’s just a matter of getting a few more people to come into the marketplace, and we’ll be in good shape.”

The Valley’s retail mix is slowly changing as some retailers continue to either reduce their presence or leave the market entirely, while others, such as discounters, continue opening stores in existing space, Fischel said. More supermarkets, as well as video rental outlets like Blockbuster and Hollywood Video, are expected to close this year, he said.

“Eventually you see some retailers that aren’t in the Valley look to the Valley and say, 'there’s opportunity there,’” he said. “You see that a little bit already. There’s a new (national) furniture concept called The Dump, a big furniture store, and they have taken the vacated Costco Home space at Elliot Road and Priest Drive.”

In the meantime, there’s no need for retail construction because there’s enough space already to accommodate future population growth, Laing said.

“We’re not going to see any new development for probably at least two years, if not three to five years, because we’ve built to the edge,” he said. “We’ve built to where the population has to blow up.”

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