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Sunday, 04 August 2013 21:24

Shifting retail climate puts emphasis on smaller centers in Southwest Michigan

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Regional malls may soon become a part of American nostalgia as changing consumer and business trends are moving away from large, costly shopping malls to smaller often mixed-use developments.

As those trends take hold, they have the potential to reshape the retail landscape in communities in Southwest Michigan, including in Kalamazoo and Battle Creek.

A number of factors are driving the move out of regional enclosed malls, said Tim Timmons, vice president of Meyer C. Weiner & Co., a Portage-based commercial real estate developer. Among them: the high cost of occupancy, the inherent risk of losing a major anchor tenant and the associated costs of operating large buildings, he said.

“They’re also expensive to heat and cool. Lighting, security and dumping trash cans all add to the common maintenance expense,” Timmons said.

Lifestyle centers, some of which include residential units along with retail and entertainment venues, continue to grow in popularity. Timmons said there’s a real trend toward good visibility, convenience, good parking and access in various formats, including strip centers, lifestyle centers, and in some cases enclosed malls.

“Lifestyle centers have proven to be very popular for tenants,” Timmons said. “The problem with putting in a lifestyle center where there’s a regional mall is you already have some of those tenants.

“In a perfect world, General Growth Properties [the owner of Crossroads Mall] would probably have their anchor tenants surrounded by a lifestyle center here in Portage.”

The Lakeview Square Mall in Battle Creek is less than two miles down the road from a retail center with big box stores such as Bed Bath & Beyond, Best Buy and T.J. Maxx arranged in a horseshoe configuration, where they’re all connected, but each has its own entrance. The mall continues to attract consumers, but the neighboring retail center appears to be a big draw because of the convenience factor, sources said.

Timmons was also bullish on the prospects for a hot retailer such as Whole Foods Market, Trader Joe’s or Costco to open in the Portage retail corridor.

“People send me emails and ask why we can’t get a Whole Foods here,” Timmons said. “Five years ago, I would have rolled my eyes. Their business is hot and they are working on smaller prototypes. That tells me that … markets like Portage will be on their radar screen.”

Whole Foods looks for opportunities to locate in areas with a high concentration of professors and college students, according to Anmar Atchu, vice president of marketing and leasing for the Kalamazoo-based Hinman Co., which has an office in Battle Creek. At a recent International Council of Shopping Centers convention, Atchu said a discussion about that demographic focused on its tendency toward healthier eating options.

These retailers also tend to locate within major retail arteries that have a regional draw. This is one frequently given explanation for the Kalamazoo/Portage area’s ability to lock in tenants such as Old Navy and a soon-to-be-opened Dick’s Sporting Goods.

“I still think people are interested in coming to Battle Creek,” Atchu said. “We would view Battle Creek as a secondary market to Kalamazoo and Grand Rapids. I think we’d like to see some more restaurants come in — not so much fast food, but places with seating for casual dining like the Olive Garden.”

The challenge is finding space for retailers who want to locate within major retail corridors, sources said.

“Westnedge Avenue is still very popular even though it’s a pretty mature market here,” Timmons said. “If you look at a list of all the retail players in the universe, most of them are here. Some are evolving and there are some that aren’t here that will eventually come here.

“South of I-94 to north of Romence Road and the west side of Kalamazoo are still hotter than fire. We have people on waiting lists, and some of them have been on [the list] for four or five years.”

Battle Creek’s retail hot spot is Beckley Avenue, Atchu said.

“From a development standpoint, there isn’t a ton left,” he said of desirable retail locations in the Beckley corridor. “I think from a development standpoint, we would have to expand east and westbound, but there are still some vacancies.”

Hinman recently picked up a property at the corner of Riverside Drive and Beckley Road and already has two letters of intent signed for it, Atchu said. The company also expects two or three more stores to move into the retail center with Hobby Lobby across from the intersection.

“If people want to be on Beckley Road, they may have to look at being just off of Beckley or further in,” he said.

Retailers looking to claim a spot in the Kalamazoo/Portage market generally want to open a store along South Westnedge before going to the West Main shopping corridor, Timmons said.

“The U.S. 131/Drake Road/West Main corridor is a distant second,” Timmons said. “Often, we talk to people who may want to do two stores here, but if they can’t get Portage first, they (normally) have no interest.”

With signs of the economy improving, retailers seem to be more willing to make commitments to locating in communities such as Battle Creek and Kalamazoo, Timmons and Atchu said.

“People are starting to make decisions on things where before there was more of a ‘wait and see’ attitude,” Atchu said. “Kalamazoo has more opportunities today, but I feel confident with Battle Creek that we’re going to hit base hits, not swinging at the fence.”

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