Leasing of 'big box' spaces signals economic recovery for region

When Julie Poteet opened Enigma Salon 12 years ago, customers bustled among the shops surrounding hers on Colleyville Boulevard between trips to the nearby Kroger, and Poteet and her stylists had to turn down walk-ins throughout the day. Fast forward, and For Lease signs pave every window from her storefront to the end of the strip.

"I think us and the cleaners are the only ones who have been able to stick it out," Poteet said. "Some tenants moved immediately, and other tenants lasted about a year or two and then moved or closed."

What Poteet is referring to is the closing of the Kroger, her shopping center's anchor, the better part of a decade ago. Now construction next door is giving Poteet new hope for the future, as crews work to transform the space into a Walmart Neighborhood Market set to open in late October. After a year or so of watching big box vacancies fill, city officials are getting excited, too.

"When you start getting to where occupancies get up into the upper 80s (percent wise) like they are now and you're backfilling larger spaces, does that then set the stage to actually see new construction? I think so," Colleyville Economic Development Director Marty Wieder said. "Things like this create momentum, and that begins to build on itself."

Big box, big challenge

Many of the vacancies in Southlake, Colleyville and Grapevine were the result of national corporations scaling back operations. Especially in the past few years, companies nationwide have downsized their footprints and been hesitant to add new stores, officials said. Add in the fact that most retail operations do not need tens of thousands of square footage — and those that do want to locate in booming areas — and brokers and building owners are left with a real challenge, Southlake Economic Development Director Greg Last said.

"There's a reason they call them 'anchors,' but bigger tenants don't want to go in areas that are struggling either," he said. "There needs to be a balance."

Nationally, 6.6 percent of official "big-box" spaces sat vacant this summer, according to CoStar, a commercial real estate research and information company. That is down from a 2009 high of 7.9 percent, but CoStar predicts the number of large vacant spaces will increase by the end of the year as more companies scale back.

Northeast Tarrant County dipped into the recession later than other U.S. communities, though, Last said, and pulled out quicker, helping area communities buck the trend.

Shopping center fuel

The Albertsons on Northwest Highway near the Grapevine/Southlake border was already closed when Ali Merchant took over the shopping center's Pack 'N' Mail. He did not like having an empty neighbor, but he said the shop had a loyal customer base and was well placed for residents' errand runs, in a strip with a Blockbuster, dry cleaners and tanning salon. Like Poteet, though, he has watched tenants who helped fuel his business close. He hopes the fall opening of Golf Galaxy in the Albertsons space will drive customers and entrepreneurs back into the center.

"Businesses like us depend on other businesses in order to get visibility and traffic," he said. "I have hopes that with this and the [DFW Connector] construction ending, we'll start to get busier."

That is exactly what should happen, city officials say. When massive vacancies fill in, especially because so many anchor properties are prominently displayed on major thoroughfares, property managers tend to see an influx of interest in the center from tenants large and small. It is a phenomenon born of herd mentality, Last said, and in its most refined state it is sometimes referred to as cotenancy, in which companies make deals to open near each other to the advantage of both. Whether predetermined or organic, the filling of shopping centers that occurs once an anchor arrives means more customers to fuel surrounding businesses, an increase in sales tax revenue, and a general look of health to the center that encourages activity and revitalization.

"I signed another five-year lease two years ago, but I had decided if they hadn't done something with the Kroger by 2015, I would be moving," Poteet said. "Now I think I want to remodel."

The big picture

Poteet's plans are exactly what area development officials hope for, that the backfilling will create a momentum that builds up occupancy in the cities' older shopping centers and helps create a local economy with enough strength to spur on new development.

"We don't want to be a pass-through, we want to be a go-to, and backfilling vacant spaces creates a stickiness," Wieder said. "To have a space be filled, to have a parking lot with cars creates a buzz that can draw people in, that creates a moth-to-the-flame effect, and that can be good for Colleyville."

Even the addition of new jobs — hundreds from the businesses that have been filled in the last year and more to come in the next few months — creates a ripple effect. Those employees are likely to spend money in their work cities during the week, helping support surrounding restaurants and retailers, and they are likely to help strengthen the community intangibly with their time and talents. Ultimately, Last said, the goal is to kickstart a feeling, and a reality, of prosperity.

"The occupancy's coming, the tenants seem optimistic, the brokers seem optimistic," Last said. "I think the economy's coming back."