When Whole Foods Market completes construction of its new 55,000-square-foot store at The Domain in 2013, the Austin-based grocer will leave a sizable vacancy at the nearby Gateway Shopping Center.

While the grocery store’s eventual departure is causing concern for some Gateway business owners and store managers, many remain hopeful that the center will survive without it.

“It’s a loss for this place, but I hope we’ll continue to thrive here,” said Shaun Dean, store manager at Texas Running Co.

David Schoenemann, a broker associate with Retail Solutions—which provides leasing assistance for several H-E-B–anchored centers in Austin, including the Market at Parmer near MoPac in Northwest Austin—said that when a grocery store leaves a retail center, it can have a devastating effect on the center, especially when the grocery store is the only anchor tenant.

This was the case for the Anderson Arbor shopping center at US 183 and Anderson Mill Road. Albertsons closed its Anderson Arbor location about five years ago and it took until 2011 for the anchor retail space to be filled. The store was split in two for a Sears Outlet and Gold’s Gym, the latter of which opened in July.

However, because the Gateway Shopping Center has other anchor tenants, including REI, Best Buy, Crate & Barrel and The Container Store, Schoenemann said the effect of Whole Foods’ departure should be minimal.

For instance, Dean said that Texas Running Co. often draws customers who are at the shopping center to visit REI, which is located next to Whole Foods.

Nonetheless, Dean, who has worked at the Gateway Shopping Center for several years, including stints at Whole Foods and The Container Store, said the natural grocer helps bring customers to the center. He said he is unsure of what surrounding businesses could do to keep up that momentum.

“In retail, you’re always trying to find ways to get people into the store,” Dean said.

Retail epicenter

Bound by Capital of Texas Hwy., US 183 and Stonelake Boulevard, the 500,000-square-foot Gateway center sits on nearly 50 acres of land in the midst of a retail hub. The Arboretum at Great Hills, The Shops at Arbor Walk, Arboretum Crossing, Great Hills Station and Great Hills Market are all within a few miles of one another.

Gateway was built in 1993, and Simon Property Group Inc. purchased it in 2004, said Lauren Krumlauf, Simon’s area director of marketing for the Gateway center.

Despite Gateway’s proximity to other Simon-owned properties, such as the Arboretum or Arbor Walk, Dean said he does not view the centers as in competition with one another.

“[Gateway] draws different people. People come here for what they need,” he said.

Filling vacancies

Most of Gateway’s retail and restaurant space is occupied, but the southern portion of the development, called Gateway Square, has three large vacant retail spaces and another small spot, which was vacated by Manny’s Uptown Kitchen in February. Star Furniture, once located on the southern end of the center, left in fall 2010.

That portion of the center still has more than 100,000 square feet of retail available for leasing, according to site maps for the shopping center listed on the websites of both Simon and Edge Real Estate, which provides leasing assistance. However, Simon declined to release data on how much square footage remains vacant.

Simon representatives have also remained mum on whether any businesses have expressed interest in signing leases for the vacancies, including the Whole Foods location.

A representative from the company’s public relations firm said Simon has a few prospects in the works but could not release details until leases are signed.

“[We] continually look for opportunities to bring new retail concepts to our center that benefit our shoppers,” Krumlauf said.

One of the unoccupied spaces on the southernmost tip of the Gateway center is roughly 25,000 square feet and Simon placed a “coming soon” sign for a Paul Mitchell School on the front of the building. However, Laura Valdez, owner of the Paul Mitchell School in Pflugerville, said no lease has been signed.

The Whole Foods effect

Whole Foods first opened in the Gateway shopping center in May 1995 but eventually outgrew the 34,000-square-foot space.

Rebecca Scofield, a spokeswoman for Whole Foods’ Austin market, said the company has continued to experience growth in and around Austin and is always looking for ways to enhance its customers’ shopping experience.

She said The Domain location would have additional community gathering space and parking.

Olescia Hanson, spokeswoman for The Container Store, located next to Whole Foods at the Gateway center, said Whole Foods has maintained a positive relationship with its Gateway neighbors. She said Whole Foods co-CEO John Mackey and The Container Store CEO Kip Tindell have been friends for many years and that Whole Foods has been a partner at The Container Store’s college night events throughout the nation. That partnership would continue after the move.

“We share the same customers. We don’t foresee [the relocation] causing any issues,” she said.

Replacing Whole Foods

Simon has not commented on what kind of business it envisions for taking over the retail space when Whole Foods leaves, but both Dean and Jeff Veale, co-owner of Fast Forward Skate Shop, said they would love to see California–based grocer Trader Joe’s become a new neighbor.

“We would love for something with an impact to move in,” Veale said.

Trader Joe’s announced April 18 plans to open its first Austin location in the Seaholm development downtown in 2013.

Schoenemann said that grocery stores can have a positive impact on shopping centers as anchor tenants.

“People go to the grocery store, and then they decide to stay and do other stuff,” he said.

According to Retail Solutions data, grocery stores in Austin bring in $550 in sales per square foot, more than any other type of business. This helps determine rental rates for surrounding businesses, Schoenemann said.

“Traffic is steady, and that’s what attracts other businesses,” he said.

Veale, whose business has been in the Gateway center for one year, said the shopping center prospers from a constant flow of traffic and an assortment of retailers. Although foot traffic picks up on the weekends, he said his store stays busy during the week.

Veale and other Gateway retailers have discussed the fate of the Whole Foods space, and are keeping their ears open for any news.

“I hope they get that space filled quickly,” Veale said. “That’s a large space to fill.”


 
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