The 2009 Southeast Retail Roundtable was printed in edited form in the October issues of Shopping Center Business and Southeast Real Estate Business. The following is Part Two of the full transcript of the event.
SREB: Hazel [Dennis], are you seeing activity in Macon among tenants? Are they looking for better spaces in centers?
Hazel Dennis: Tenants were looking 2 to 3 years back for something but couldn’t get from the market they’re currently in to the market they wanted to be in at the price they wanted. A number of these were self-funded, but the ones that were dealing with the banks, one of the things that was helping us with our deal time and shortening it a little bit is that the bank is guaranteeing an interest rate for a shorter period of time; it’s put a little bit of pressure on the tenants to make up their minds. Before, they knew that they could get a good interest rate forever. It’s helping a little bit from an unexpected side of banks. We’re seeing tenants like Dollar General very active in the market.
SREB: As a tertiary market, does Macon have a lot of vacant space in and around the city?
Dennis: We do in the very aging part of retail, the 30-year-old centers; that’s where huge amounts of vacancy exist. It’s just that they’re past the mature stage in most cases, and Macon’s dynamics are shifting more. This shift has been slowed down by retailers sitting on the sidelines waiting for that process to pick up again. The vacancies are all along what used to be established retailer corridors, and the ends of those corridors that were iffy are all of a sudden going dark. Retail has shifted to the sure areas, which are along the interstate and those interchanges. There’s very much of a polarizing of the retail in certain strong areas, where it used to be more scattered.
SREB: Bill [Read], you have some centers in other markets in Georgia and Alabama, what are you seeing in terms of those centers?
Read: Birmingham’s done well for us. We have probably 1 million square feet between four properties in Birmingham. Like many markets, it’s still a bit over-retailed, and often the retailer has to figure out whether they want to be in a bigger center or whether they want to be in an unanchored strip. That’s a nice change that’s occurring; for a long time, many bigger centers were very full, and they didn’t provide new opportunity for demand, and when you run into that, demand’s going to create a solution. It’s either going to be an un-anchored strip center across the street from a successful center, or it’s gong to be a new growth market — a lot of times these unanchored strip centers can fill a demand or a supply issue. Now that overall occupancy’s dropped a little bit because of the economic times, some of the retailers are having an opportunity to get into centers that are bigger and better, just like they were talking about as far as going from a C center to a B or an A center. When you get into some of the smaller markets, you’re not on the radar screen for some of the national anchors anymore, where if they have 10 stores in Atlanta, they’re better off putting an eleventh store in an area where they couldn’t get into where they already have an advertising presence versus going into a new market where they’re not advertising and open two stores. Most of the smaller markets have held well for us, particularly in Mississippi. We really have had no change in our occupancy levels in most of our Mississippi shopping centers.
SREB: Have you seen a steady interest from drug chains and supermarkets looking for locations?
Read: It’s no secret that Food Lion’s coming into the Atlanta market. I haven’t seen much in the way of supermarket activity in Alabama outside of Publix. They seem to have some very select markets that they want to get into, and they seem to be penetrating those markets and have a steady growth plan — I don’t think it’s accelerating, but it’s slow and steady — and it will help them grow in that state. Alabama certainly has room for a premiere grocer to grow.
SREB: Are restaurants still pushing expansion in some places?
Gunning: In certain cases, yes. You’re still seeing some restaurant growth more in the quick-serve market and more at a corporate level. At the franchise level, there is still a gulf between what a franchisee is capable of doing and what his lender is going to let him do. On the corporate side in the quick-serve category, you’re still seeing some good activity.
SREB: Do you get a lot of people coming to you who are looking to be franchisees? In today’s market, a lot of people have lost their jobs, and there are some very significant people out there who still have money that are too young to retire, and they’re looking for something where they could have their own business.
Gunning: We get the franchisees or the franchisors calling us to say, “We’re getting a franchisee in your market, we’d like to use you,” that kind of discussion. As far as individuals calling us about which franchise to go to, we don’t get that call. There are so many other sources of that information out there that would be so much more informative than us. We have no idea about the inner sanctum of that relationship. We get developers calling us sometimes or landlords calling us saying they need some help with their restaurant in terms of a manager or wanting a restaurant in a certain project.
Read: The person that’s looking for the franchisee, I’ve actually not seen that much of it. I’m used to seeing that, believe it or not, when times are good — “my job is good, and I’ve made a life decision not to want to do that anymore, I’m going to take my nest egg.” What led to part of the expansionism we’ve had in the past is the entrepreneur leaving their job. There’s a great opportunity for the entrepreneur in America to make a lot of money out of this changing situation. How many times has a landlord or anybody sitting around here said, “I had a space and the merchant didn’t make it, and I re-leased it, and it was a new use, but the merchant that went in there is kicking it; they’re making a lot of money?” Was it a bad space, or was it really lining up the right retailer there? When you have a company our size, if I could find 20 qualified chefs that had a dream and a work ethic, we can find a way to work with them on capital, we can find a way to work with them on sourcing more talent and training. It’s not the typical leasing hat that we’re used to, but when you have as much square footage as we have, we’re going to have a vacant restaurant somewhere that just needed the right concept and the right person taking care of it. As a company, we’ve started a new business development program that has grown to well over $20 million per year worth of income by allowing potential entrepreneurs an opportunity to lease something on a much shorter-term basis, a very short-form lease, at a rent that they would probably never get. It fills up some of our occupancy; it provides an opportunity for an entrepreneur to try something that they normally would not get the opportunity to do. It’s going to be a growing segment of our business for years to come.
Wein