Getting your player ready...
Despite high-profile retail bankruptcies and a rough economy, the Denver-area retail market has remained relatively healthy and can still boast more than a 90 percent occupancy rate, according to a report released on Thursday.
The overall Denver-area retail market’s occupancy rate still stands at about 91 percent, relatively close to its peak occupancy rate of 94 percent, said Frank Griffin, a retail broker at Newmark Knight Frank Frederick Ross.
“In 2010, the Denver metropolitan retail market stabilized and enjoyed moderate growth, driven by the the delivery of heavily pre-leased new projects,” according to the retail report released at the commercial real estate company’s ‘Mile High Market Trends Forum,” held on Thursday. “However, Denver’s retail market, a mirror of the economy, is mired in a U-shaped recovery,” the report continued. “In the first half of 2011, there was scant pipeline to boost absorption and national closures continued to impact the market.”
The retail markets posted absorption of negative 215,911 square feet in the second quarter, bringing year-to-date absorption to negative 76,518 square feet,, according to Newmark Knight Frank Frederick Ross. Absorption measures the change in occupancy between two periods of time. So if a market had 100 square feet of occupied space, and it fell to 80 square feet a year later, it would have 20 square feet of negative absorption. If it rose to 120 square feet, it would have shown a year-0ver-year absorption of 20 square feet.
Retail follows rooftops
Retail performs best when it follows rooftops, noted Griffin, who has been a commercial real estate broker for more than three decades, weathering numerous real estate cycles.
“Retail growth depends on residential growth,” Griffin said. However, despite the worst residential growth in recent history, the 89.3 million-square-foot retail market did not try to anticipate housing growth “and get ahead of it,” as some other far-more battered markets across the country did, Griffin said.
The market would have done even better if not for Ultimate Electronics, which closed six stores, dumping 260,000 square feet of space on the market, and Borders, which closed two under-performing stores, leaving 50,000 square feet of vacancy.
On the positive side, the 415,000-square-foot IKEA store will open along the I-25 southeast corridor later this month and the area’s first H&M clothing store – one of the most sought after in the world – is filling the Niketown space in the Denver Pavilions, he noted. “They’re both Swedish companies,” Griffin said, which he said will help provide more of a global spotlight on Denver. The Central Business District’s vacancy rate already is out-performing the overall market, with a 4.82 percent vacancy rate and more than 20,000 square feet of positive absorption so far this year.
Walmart buys former Albertsons
In addition, a recent transaction that has been “under the radar,” is that Walmart has bought four former Albertsons. While Walmart and others have been mum about the giant retailer’s plans, it is possible that Walmart plans to bring a new concept into Denver, possibly its Neighborhood Market grocery store concept- to the Denver area. Walmart paid a total of $12 million to California-based Smart and Finals, a hybrid grocery chain, for the former Albertsons. Walmart purchased the former Albertsons at 3615 W. Bowles Ave., Littleton, for $2.9 million; 5141 Chamber Road, $2.9 million; 1442 Parker Road, $3.2 million, and 16747 E. Smoky Hill Road, $3 million.
One advantage of buying a former grocery store – and replacing it with its own grocery store – is that the zoning will be in place, Griffin said. In 2004, Walmart proposed building the first Neighborhood Market store at West 38th Avenue and Wolff Street in the Highlands’ Garden Village in northwest Denver, but pulled the plug after protests from neighbors. Instead, Sunflower Market built a store on the site.
Griffin said that “all the buzz” at the recent International Council of Shopping Centers convention in Las Vegas was that “infill urban” sites are expected to the best retail performers. Griffin said that is true in the Denver-area, too. He said that trend bodes well for the Sembler Co.’s plan to redevelop the former University of Colorado Hospital site at East 9th Avenue and Colorado Boulevard. That trend also should help the planned redevelopment of the Westminster Mall into a residential and retail city center, which could ultimately be similar to Belmar in Lakewood and the Streets at Southglenn on the site of the former Southglenn Mall at Arapahoe Road and South University Boulevard.
