The Comeback Is On

What are retail shopping center developers up to in the vibrant northeastern region of the United States?

All across the Northeast — in which we include Ohio, Maryland, Virginia, Pennsylvania, New Jersey and the traditional northeastern states to the north — developers are renovating, redeveloping, raising rents, welcoming tenants and starting to get back to normal.

A few are even breaking ground on new developments — but only a few so far. Still, those new developments testify to how retail shopping center development has evolved toward mixed-use properties since before the recession.

Chain Store Age recently asked retail shopping center developers, owners and service providers to profile the industry in the Northeast in 2013 and to look ahead to 2014. Here’s what they had to say.

Phillips Edison

Limited supply, reduced cap rates

Cincinnati-based Phillips Edison & Co. has acquired 16 shopping centers in New York, Pennsylvania, New Jersey and Maryland, with about 1.98 million sq. ft.

The list includes two grocery-anchored centers, one in the Erie, Pa., market and the other in the Pittsburgh market, acquired in 2013 for the Phillips Edison-ARC Shopping Center REIT Inc.

Just two in this region? “We are encountering limited supply in this region along with aggressive pricing and reduced cap rates,” said Bob Myers, Phillips Edison president and COO. “It’s harder to put money to work here than in other areas.”

The Erie acquisition, Yorktown Centre, made in August 2013, is a 196,728-sq.-ft. property anchored by Giant Eagle, the region’s dominant grocer. Other major tenants include Panera Bread, The UPS Store, GNC, Wells Fargo and Eat’n Park.

A reflection of the trend toward closer-in, more urban retail centers, Yorktown Centre is located in a densely populated trade area — 71,000 residents — in downtown Erie less than a mile from I-79.

In addition, nearly 310,000 sq. ft. of office space occupied by 11,300 employees is within a 1-mile radius of the center.

Emblematic of the region, Yorktown is 100% occupied as retailers seek out good markets. “The lack of new development in the region has allowed us to improve the occupancy levels of our centers,” Myers added.

Brixmor

Opportunities to raise rents

With more than 520 properties in all, Brixmor Property Group operates the nation’s largest wholly owned portfolio of grocery-anchored community and neighborhood shopping centers. In the Northeast, the company owns 121 properties spanning 18.9 million sq. ft.

Notable 2013 projects include an addition of 22,000 sq. ft. to the 311,000-sq.-ft. Marlton Crossing shopping center in Marlton, N.J., for a new Michaels store. The company also remerchandised the 191,000-sq.-ft. Dalewood Shopping Center north of Manhattan, replacing two traditional grocers with two specialty grocers and adding an H Mart and a Mrs. Green’s Natural Market.

“Lack of new development coupled with retailers’ expansion plans have created competition for space in quality centers, increasing occupancy and rents,” said Barry Rodenstein, president of Brixmor’s North regional operations.

While new developments are scarce, redevelopment is not. For example, when Brixmor’s 175,000-sq.-ft. College Plaza on Long Island — 103,000 people, $91,000 average household income within a 3-mile radius — lost its anchor and began to underperform, Brixmor redeveloped the center, taking advantage of the opportunity to raise rents.

“We repositioned the center by relocating a 61,000-sq.-ft. Bob’s Stores to a more appropriately sized 31,000-sq.-ft. space and remerchandised the larger space with a ShopRite,” Rodenstein said. “The $13 million redevelopment improved the center’s draw, traffic and sales.”

Rodenstein went on to say that he expects to see continual improvements in absorption rates and rental growth in all northeastern U.S. markets throughout 2014.

Forest City

Urban retail on fire

Forest City Ratner Cos. has 17 properties in New York and New Jersey spanning about 5 million sq. ft., mostly in urban settings.

“Urban retail is on fire,” said Kathy Welch, executive VP in Forest City Ratner Cos. Retail Group. “Most of our projects are at or above 98% occupied.”

Is this a comeback after the recession? “I don’t think so,” Welch said. “Retail has been steady in urban areas — Staten Island, the Bronx, Queens, Manhattan and Brooklyn.

“In Brooklyn, a housing boom has at last led to the recognition that the borough is now an important retail market.”

For instance, Forest City’s Atlantic Terminal in downtown Brooklyn is emblematic of the direction of urban retail today. Located near the Brooklyn Academy of Music and Barclays Center, the Atlantic Terminal sits on a hub of 11 subway stops, a Long Island Rail Road terminal and many bus stops.

Anchored by a two-story, 200,000-sq.-ft. Target, the center offers four stories and 375,000 sq. ft. of retail, plus a 15-story tower with 315,000 sq. ft. of office space atop the retail.

“Retailers are still skittish about the recession,” Welch said. “But they are adding stores. With retail rents in Manhattan and some areas of Brooklyn reaching record levels, tenants are still willing to lease space in these proven areas that provide national exposure.”

Regency Centers

Restarting development

Regency Centers owns 65 properties spanning 7.6 million sq. ft. across the Northeast. During a busy 2013, Regency closed on two shopping centers, renovated two centers and designed a new center that will go up next year.

In a joint venture with Charter Realty & Development Corp., Regency acquired the Fellsway Plaza, a 150,000-sq.-ft. neighborhood center anchored by a new Stop & Shop supermarket located in Medford, Mass., in the Boston metro market.

“We’re planning to renovate the façade and put up a new building for retail and restaurants on some undeveloped land on the site,” said Alan Roth, senior VP with Regency. The company also acquired Burnt Mills, a neighborhood center anchored by Trader Joe’s in the metropolitan Washington, D.C., area.

Regency renovated the 103,269-sq.-ft. Fox Mill Center in Herndon, Va., and the 162,381-sq.-ft. Parkville Shopping Center near Baltimore.

Last but not least, Regency planned a new development this year. It will be located in Ashburn in Loudoun County, Va., a wealthy community with an average annual household income of $132,000. Anchored by Loudoun County’s first Whole Foods Market, Belmont Chase, which will seek LEED certification, will provide 25,000 sq. ft. of retail, plus three pads for restaurant buildings set around a small lake with a fountain. Construction is scheduled to start in the spring, with the grand opening coming in the fall of 2014.

PREIT

Watching the Philadelphia market closely

Pennsylvania Real Estate Investment Trust — PREIT — has 38 properties encompassing more than 25 million sq. ft. across New Jersey, Pennsylvania, Maryland and Massachusetts.

Early in 2013, PREIT announced a joint venture with Simon Property Group to develop an outlet center in Gloucester, N.J. In addition, PREIT has remerchandised several properties this year.

“In Philadelphia, we are in the pre-development phase of a new project called The G