Developers with properties in denser areas in the region are looking to build smaller commercial developments, and others are looking north and east, where land is cheaper, according to real estate professionals.
“Right now, small is really attractive; it's easier, and the bigger [developments] take more time and a bigger investment,” said Karen Judson, vice president of marketing and research at Transwestern.
Round Rock Development Director Brad Wiseman said the city’s commercial development in recent years has been largely focused on infill development, or development focused on smaller space.
“I think with the growth in residential there’s been higher demand for neighborhood service retail [such as] hair salons and fitness studios—the type of services that draw from the immediate area, not a citywide draw,” Wiseman said.
Evan Dyer is the director of Huntington Properties’ Austin office, which is the developer behind the Shops at Greenlawn near Louis Henna Boulevard in Round Rock. He said additional larger-scale retail centers will come as the population increases, especially in the areas closer to SH 130 in Pflugerville or University Boulevard in Round Rock. But he said in the meantime, even a smaller shopping center can lead to high profits for significantly lower cost.
“[Huntington Properties] has been doing [small-scale retail development] forever, and now the other folks are coming in and trying their hand,” Dyer said. “It’s a financial opportunity if you’ve got $2 [million] to $3 million. It’s not that much money to raise to buy some dirt and build a building, and the profits can be quite substantial.”
Russ Boles, broker with Summit Commercial in Round Rock, said commercial developments are focusing on infill development because housing developers are similarly focusing on smaller developments.
“With new housing comes bigger retail opportunities,” Boles said. “What the infill does is it fills the opportunities that were missed originally.” [polldaddy poll=9331231]
National homebuilders are focusing on keeping inventory of undeveloped land low because many of the companies are now publicly traded and undeveloped land shows up on their financial audits, Boles said.
“What we’re seeing is [homebuilders developing] tracts they know they can get in and out of,” Boles said. “You don’t see 400-home subdivisions coming in. You see 45- or 25-home subdivisions coming in.”
Wiseman said from 1995 to 2007 there were roughly 800 homes being built in Round Rock a year, with the high point being 1,770 homes built in 2000. He said from 2007-2013, when the nation was dealing with the housing collapse, the average was about 200 homes a year. Since 2013 he said Round Rock has seen about 400 homes built a year.
With the gradual growth of homebuilding comes more retail opportunities, pointing to the Vizcaya subdivision in northeast Round Rock, which will have 1,200 homes at build-out, as well as growth in the Forest Grove community off Red Bud Lane and single-family condo developments throughout the city, Wiseman said. He said the number of homes in the city’s extraterritorial jurisdiction is also growing.
Developments such as shopping malls or centers with big anchor stores are falling out of favor for smaller or mixed-use developments throughout the Greater Austin area, Judson said.
Wiseman said Round Rock has the land for a new large-scale retail center, but the question is if anchor tenants want to build in the area.
“Its not outside the realm of possibility that we could [get more large-scale retail in the near future],” he said. “Typically larger-scale retail is going to revolve around a major anchor.”
Furthermore, Wiseman said that many of the prime corridors for retail are already heavily developed, such as I-35 and Hwy. 79. However, he said as the population continues to grow, potential for other corridors will grow with it.
Boles said many of the attractive anchor tenants already have a healthy presence in the city, such as Lowe’s, The Home Depot or H-E-B. He said anchors that are not in the city, such as Whole Foods Market, Trader Joe’s or Alamo Drafthouse Cinema, are the ones that tend to space themselves out farther than other retailers.
One development in Round Rock that is currently looking for an anchor tenant is the redevelopment of the former Garden Ridge store at the northwest corner of SH 45 N and I-35. Manny Farahani, the developer behind the project, said the project will be a 100,000-square-foot development with an anchor tenant and pad sites for businesses such as banks or restaurants.
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The most recent large-scale developments in the Round Rock and Pflugerville area are H-E-B centers off University and Stone Hill Town Center at the intersection of SH 45 N and SH 130.
Josh Friedlander, broker associate at Newquest Properties, said Stone Hill Town Center in Pflugerville, managed by Newquest, plans to expand with additional buildings that will host tenants such as Freebirds World Burrito and a mattress store.
“We’ve got 196 acres; we’ve got different pads and different areas we can add on,” Friedlander said. “Next to the Cinemark we’re trying to find another entertainment group, a Dave & Buster’s-type-place featuring a bowling alley.”
Next to Stone Hill Town Center, another development called The Shops at 685 is under construction. It is a 24,000-square-foot site with tenants including Chipotle and Pie Five Pizza.
Friedlander said the area is a hot draw, and he expects further developments to occur around Stone Hill.
“There’s a lot of demand, and we can’t build it all,” he said.