Lakeline Market includes H-E-B Plus, Alamo Drafthouse

A new kid on the block could change the retail landscape of an Austin corner long dominated by Lakeline Mall.

Lakeline Market, a mixed-use retail center anchored by H-E-B Plus and Alamo Drafthouse Cinema, debuted in November at US 183 and Lakeline Boulevard next to the 18-year-old indoor mall. The 253,000-square-foot "power shopping center" represents a more modern retail concept that does not necessarily need to be anchored by a traditional department store or big-box retailer, said Del Kendall, managing director of the Real Estate Research Corporation.

"The lines have blurred because retail has changed so much the past few years, so there's been a lot of experimenting with new formats," he said. "The grocery-anchored power centers are pretty strong if they have a strong anchor, which H-E-B is probably the strongest in the Southwest—certainly in Texas."

H-E-B previously anchored only modest neighborhood retail centers, said Milo Burdette, vice president of development at Barshop & Oles, an Austin-based retail development company.

"It all changes and evolves," he said.

But that does not mean conventional shopping concepts have become irrelevant, Kendall said. In fact, Austin-area malls have a lower vacancy rate than power shopping centers, 2.6 percent versus 3.3 percent, respectively, according to a 2013 mid-year review by research agency CoStar Group.

Both concepts should continue to benefit from an anticipated 2.8 percent increase in new retail stores nationally in the next year, Kendall said. Many of those new shops are seeking spaces of 5,000 square feet or less—a trend he said should bode well for malls and power shopping centers alike.

Old school

Open since 1995, Lakeline Mall is one of only two indoor shopping malls in Austin. The mall continues to attract shoppers because of its diverse range of retailers, General Manager Jim Hopping said.

"Mall customers have a baseline expectation of what stores should be there," Hopping said, citing The Gap and other clothing outlets as examples. "Then there's other stores that round out the whole experience."

Malls also have distinct advantages for retailers. Lease rates are cheaper, according to CoStar Group's Austin mid-year retail report, and spaces can be quickly retrofitted for new businesses.

"We're turn-key ready," Hopping said. "They basically just need to bring in merchandise and a sign."

That versatility allows Lakeline Mall to provide certain tenants with short-term leases. That proves particularly useful for seasonal operations such as Calendar Club, he said.

"It's also a great incubator for a small business that might not have the capital to do a full-blown capital investment," Hopping said. "This allows them to test the water with a short-term commitment and see if it works."

Earthbound Trading Company, a jewelry, apparel and personal accessory shop, first opened under a short-term lease before becoming a permanent Lakeline Mall tenant. Such businesses often benefit from neighboring national retailers that attract more shoppers, he said.

"Nowhere else will you get the same amount of foot traffic," he said. "There's a huge difference between people walking past your store with a buying frame of mind and driving by."

New school

When Mike Pacillio purchased land three years ago next to Lakeline Mall, he had no idea his property would also be adjacent to Lakeline Market. Now, as he prepares to open the 348-unit Lakeline East Apartments in September, the longtime developer is thrilled to be tucked between the two retail havens.

"There's a degree of luck involved in every business, and that was certainly luck for us," he said. "We didn't know [Lakeline Market] would be such high-quality and be built that quickly."

The 348-unit apartment complex includes a below-street passage that allows residents to safely walk across Pecan Park Boulevard to Lakeline Market, one example of how Pacillio is leveraging his 253,000-square-foot neighbor to market his project. The approach has worked, with more than two dozen apartments already pre-leased, he said.

"It's very rare to be able to walk to a movie theater, a restaurant and a grocery store from your home," Pacillio said. "There's very few places where you can accomplish that—I'm talking about nationally. That's very unique to see those different uses together."

Pacillio intends on building the similarly sized Lakeline West Apartments once demand warrants expansion. Construction is also underway across Lakeline Boulevard on The Park at Lakeline, a 352-unit apartment complex expected to open later this year.

All these new apartments will be next to H-E-B Plus and the rest of Lakeline Market, which debuted strong in November because of its easy access to highways and large intersections, said Leslie Sweet, H-E-B's director of marketing.

"It doesn't hurt to be at the apex of growth," she said.

Both H-E-B Plus and Alamo Drafthouse relocated from the Lake Creek shopping area approximately 1 mile south. The move made more sense than trying to renovate existing space, Alamo Drafthouse CEO Tim League said during a July 18 sneak peek of the new 10-screen theater—the largest such Drafthouse venue nationally. Whether the move pays off has yet to be seen, he said, although he expects patrons to follow the popular local theater chain to the new location.

"The funny thing about projections and business plans is we don't really know. Because we have such an established theater with Lake Creek, we are hoping at the very least that [business is] even, but we've added screens, which means we can have more movies," League said. "That alone allows us to get more interesting with the programming."

H-E-B Plus and Alamo Drafthouse have helped attract a variety of other smaller tenants, Burdette said, leaving only four spots left to fill. He expects the rest of the shops to open by the end of 2013 to early 2014.

Kendall said retailers will need to continue evolving with the changing market, if the past decade has been any indication.

"Retail in the future will be nothing like retail today. It will continue to evolve," he said. "It's the most evolutionary market in all of real estate."