Commercial real estate strong in Southwest Austin, but empty anchor spaces linger, area experts say

Commercial real estate is active in Southwest Austin, according to local agents. Major shopping center The Shops at Arbor Trails recently achieved 100 percent occupancy, said Garrett Christopher, property manager for Christopher Commercial Inc., which manages leasing for The Shops at Arbor Trails and Escarpment Village. In October, Randy Palmer's South Austin Gym and Events Center opened in the vacant Cherry Creek Plaza space last occupied by Goodwill, bringing new customers to the strip mall, gym owner Randy Palmer said.

Target South Center is also full, and Southpark Meadows Phases 1 and 2, which comprise more than 1 million square feet of space, is 97 percent full, said Neal Kieschnick, the shopping centers' leasing broker with United Commercial Realty.

These centers benefit from anchor tenants, businesses that take up significant space and provide stability, Kieschnick said. Anchors such as grocery chains, department stores and big-box retailers keep customers coming back often, he said.

"Smaller shop tenants choose to locate in larger shopping centers because of that traffic that's generated by larger anchors," he said.

When a large business opens, it revitalizes the area, Palmer said. He is now offering classes and plans to host sports events at the new gym in Cherry Creek Plaza.

"We don't directly compete with anybody here; we only add to and enhance what they're doing, and likewise," he said, adding that his current clients and new customers will undoubtedly shop at the nearby Dollar General and Thrift Town, visit the nail salon, and eat at neighboring restaurants.

Anchor tenants are vital, according to Joseph Christopher, Christopher Commercial leasing director.

"A perfect example of that is the H-E-B grocery store [anchoring Escarpment Village shopping center]. Without that, the center itself loses a huge chunk of value it's the groceries for all the neighborhood, and from there you get all the other services for the neighborhood," he said, adding Escarpment Village is 100 percent occupied.

Vacant space

But not every anchor space in Southwest Austin is filled. Nestled within an enormous parking lot at the intersection of West William Cannon Drive and West Gate Boulevard, the 57,830-square-foot structure that once housed Community Renaissance Market is empty.

Community Renaissance Market, which closed last year, was an incubator for small businesses, so the building is divided with partitions, said Christopher M. Gibbons, director of project leasing for Venture Commercial Real Estate, which is looking for a new tenant for the building.

"We're marketing the space as a prospective one-use, one tenant as opposed to anything else," he said, adding that it is leased by Albertsons, so a new tenant would sublease and remodel that space. "Losing an anchor always impacts the smaller tenants adversely because of the loss of traffic generated," he said.

Gibbons said when Venture first took over leasing for the space, it put together a list of businesses that might benefit from the location, size and more than 48,000 cars driving through the intersection daily.

"It's a neighborhood market that is very limited in vacancy, so it's a great opportunity for a grocery or a school or another user to take that space," he said. "I can't predict the future, unfortunately, so I do not know what is going to happen. We're diligently pursuing any interested parties and hope that within the next year we do have someone [in that space]."

The former Sprouts Farmers Market on Brodie Lane in Sunset Valley closed nearly a year ago, and that building also remains vacant, City Administrator Clay Collins said. The city can't simply select a new tenant, he said, but its staff can—and must—be as helpful as possible to interested businesses because of anchor tenants' importance to Sunset Valley.

Sunset Valley relies on anchors

The Home Depot, Academy Sports + Outdoors, T.J. Maxx and Bed Bath & Beyond are among the largest stores in the city, and they partner with the city for programs and safety fairs, he said. But more importantly, more than 95 percent of the city's general fund is paid for by sales tax, so if one anchor closes, the city loses that money, Collins said.

Between 2008 and 2009, three of the city's top 10 retailers in terms of square feet—Circuit City, CompUSA and Linens 'n Things—closed because of national bankruptcies, Collins said. That year, there was a 6.4 percent drop in the city's total sales tax collections. Because of this, the city prepares by setting aside 18 months of reserves.

"It's set aside in recognition that the city is relying on a volatile source of revenue," Collins said.

When an anchor tenant leaves, spaces can also be divided and leased to smaller tenants, and existing tenants can relocate. When Whole Foods came into The Shops at Arbor Trails, Haverty's moved out of the endcap space to give the specialty foods retailer that location. The decision made good business sense, Joseph Christopher said.

"Everybody in a buyers' market wants a grocery anchor tenant. That's very desirable. It's somebody that's going to put more eyes on your business, multiple times per week," he said.

As Palmer puts it, "As a business owner, the one true constant you can always count on is going to be change."