Big-box retailers are being drawn to the outskirts of the city where new shopping centers are under construction, leaving obsolete retail space in the city’s core vacant.
“Many of these big-box retailers went into new ground-up construction in the peripheral areas of metropolitan Tucson, leaving existing vacant properties to sit vacant,” Nancy McClure, first vice president with CBRE’s Tucson office said in her annual Big Box Report. “There are many of these that are obsolete properties that may never get absorbed, and the challenge moving forward is working to redevelop or construct new retail spaces that meet the current retail prototypes or reuse or demolish to make way for other uses.”
Big-box retailers — which occupy 10,000 square feet or more — were drawn to the outskirts of the city, following new housing developments that took shape in 2017. Clusters such as the Houghton Town Center in Vail and the Arizona Pavilions in Marana have been actively adding retail.
Being the first anchor in new developments is a goal for big retailers, said broker Greg Furrier, with Picor.
“It’s the reality of retailers wanting to stay ahead of the growth to dominate a neighborhood or market,” he said. “And, the majority of those that opened on the perimeter already have a presence in the middle of town.”
Tucson has always been conservative in retail construction, and the larger vacant retail spaces aren’t always appealing.
“Some spaces are functionally obsolete with low clear-height, column spacing or dimensions that make it hard for current retailers to merchandise,” McClure said. “These spaces often lack sufficient parking to accommodate the types of uses like entertainment, fitness and call centers.”
McClure predicts more demolitions and rebuilds in 2018, like developers did on the northeast strip of Broadway and Craycroft Road; at Wilmot Plaza, on Broadway and Wilmot Road; and Amphi Plaza, on Fort Lowell Road and First Avenue.
New job announcements and new-home construction is keeping Tucson on the radar for retailers.
“Tucson is viewed on a positive note right now,” Furrier said. “Housing isn’t just being built, it’s being bought and to retailers that translates into sales revenue.”
PARKING AND WIDENING
Some retailers are leery about new builds because of road construction in the city’s core, said retail broker Pat Darcy, with Tucson Realty & Trust Co.
“Most retailers would like to be in the center because they know the rooftops are there,” he said. “But, widening projects on Grant Road and Broadway are holding things back because retailers are hesitant to build until they know what’s going to happen.”
If the roads are widened more than expected, it could cut into parking, and if they aren’t as wide as planned, it could leave a retailer sitting far off the main drag, Darcy said.
Furrier agreed and said a lot of existing retailers have lost parking because of street widening.
“Some buildings with limited parking are only conducive to certain retailers, such as furniture stores with low customer visits,” he said. “A lot of properties have become under-parked.”
PREDICTIONS FOR 2018
Online shopping trends will continue to impact brick-and-mortar stores, McClure’s report says.
“Retail experts predict the year ahead will usher in more challenges for certain retailers, especially department stores, resulting in vacancies and the need for creativity in re-tenanting larger spaces.”
Mall operators are bracing for announcements on store closures and ways to add retail that is “online-proof” such as gyms, medical centers and office space, which sometimes requires rezoning.
Shopping centers with entertainment, lodging and medical services are the new trend, versus enclosed malls. Developers of both the Foothills Mall and the new shopping center on Irvington Road, near Interstate 19, plan to add venues that draw people and are negotiating with hotel chains.
“It goes without saying, most retailers are working to modify their store sizes, and number of stores, to adjust to customer demand,” McClure said. “No doubt that effort will be ongoing and fluid over time.”
