By David Nicolson, president, Weitzman San Antonio
In March 2020, health officials first used the term “pandemic” in reference to COVID-19. Since then, our communities, economy, commercial real estate industry and retailers and restaurants have gone through a year of challenges that few could have foreseen at the start of 2020.
The fact that today we are in better shape than we could have predicted during the shutdown a year ago shows that the disruptions caused by the pandemic have been met with innovation, creativity and plain hard work.
Here in San Antonio, those disruptions did result in a number of retail and restaurant closings. But since the second half of 2020, we’ve seen an upswing in tenant demand.
David Nicolson, Weitzman San Antonio
In terms of closings, Sears closed its 150,000-square-foot store at South Park Mall and its approximately 134,000-square-foot store at Rolling Oaks Mall. With these store closings, Sears — once the nation’s largest retailer — no longer has a presence in the San Antonio market.
Other closures include Stein Mart (three box vacancies), Pier 1 (five closed stores), Gold’s Gym (three closed locations) and Tuesday Morning (one closed location). Combined, these closings resulted in approximately 564,000 square feet of total vacancy being returned to the market.
Additional large vacancies will be created this year when Macy’s closes its anchor stores at two malls, Rivercenter and Rolling Oaks. In addition, Alamo Drafthouse Cinema is closing its San Antonio-area location in New Braunfels and may close additional venues as part of its Chapter 11 bankruptcy filing.
But thanks to San Antonio’s resilient economy and a vibrant housing sector, our market did not see closings approach the level of the Great Recession, when prominent chains like Borders, Linens ‘n Things and Circuit City failed and left large-format closings in nearly every regional trade area in the market.
This time around, managers and landlords understood the importance of keeping tenants in place with lease workouts, help with Paycheck Protection Program (PPP) loans and digital marketing support. Tenants themselves rolled out or expanded innovations like curbside pickup, third-party delivery, takeout and buy-online-pickup-in-store (BOPIS) services.
As a result, San Antonio’s retail market is reporting a lower, but still healthy occupancy rate of 93.6 percent, compared to 94.5 percent at the start of 2020. The occupancy rate is based on a total inventory of 47.3 million square feet in multi-tenant retail centers with 25,000 square feet or more.
Despite a turbulent year, developers still see retail and restaurants as critical components of mixed-use projects such as Lone Star District, a redevelopment of the former Lone Star Brewery site by Midway and GrayStreet Partners. See page 13 for more on this project.
While the occupancy rate is healthy, we expect it to further improve throughout 2021 as the rollout of vaccines creates a sense of safety for shoppers as they return to stores, restaurants and entertainment venues.
Retailers have endured some of their most challenging times ever over the past year. But we entered this downturn after back-to-back years of healthy performance and a decade of near-historic low retail construction that has kept oversupply to a minimum in San
Antonio.
That low volume of construction remains intact. During 2020, only 355,000 square feet of new space was delivered. With the exception of a new H-E-B grocery store, the majority of new product was for additional space at successful centers, as well as a number of small convenience- and restaurant-oriented projects.
The low level of construction has also kept occupancy strong by driving demand to existing vacancies in
well-located centers. Even in the midst of the pandemic, San Antonio experienced a number of deals that involved strong tenancy for existing space. These included:
• Nike, which opened its new “Nike Unite” concept in existing space in Alamo Quarry Market;
• Dick’s Sporting Goods, which opened in a 60,000-square-foot former Toys ‘R’ Us/Babies ‘R’ Us space at San Pedro Crossing at 125 NW Loop 410;
• Goodwill Industries of San Antonio, which is redeveloping a vacant 124,500-square-foot former Walmart store at 7702 N. Interstate 35 as an outlet store and operations center. Goodwill also backfilled approximately 15,000 square feet of space in a retail center located at 4949 Northwest Loop 410;
• Burlington, which opened in the former Babies ‘R’ Us location at The Rim, a major regional center located along Interstate 10;
• Pinstack, an entertainment concept that backfilled a 52,290-square-foot space in a former Sears at Park North Shopping Center, located at 842 NW Loop 410, for a venue that will open later this year.
Restaurants, a category that was especially challenged by the pandemic, nevertheless reported steady leasing activity, particularly in the second half of the year. Concepts that saw second-generation space as an opportunity to expand included:
• Red Hook Seafood, which leased a 6,500-square-foot restaurant building at The Village at Forum Parkway;
• Green Vegetarian Cuisine, which backfilled in a 2,800-square-foot former wine bar space in Alamo Quarry Market;
• Señor Fish Seafood Bar, an Austin-based concept that opened its first area location in a second-generation space at 1915 Broadway near The Pearl District;
• Gus’s World Famous Fried Chicken, a Tennessee-based concept that debuted in San Antonio at 812 South Alamo St.;
• Hook & Reel, an East Coast chain that will open at 4903 NW Loop 410;
• Jollibee, a Filipino quick-service chain that will open its first area location fronting a Walmart-anchored center at 5033 NW Loop 410;
• Mon Chou Chou, a French brasserie that is backfilling the second-generation space at 312 Pearl Parkway;
• Bovino’s Churrascaria, a Mexico-based Brazilian steakhouse, which saw its first area location come on line in the Shops at La Cantera mall;
• Jimmy Buffett’s LandShark Bar & Grill, which opened its first area location at downtown’s Shops at Rivercenter.
The outlook for the San Antonio retail market centers on continued stability, especially if the promised curtailment of the COVID-19 virus occurs due to the distribution of the new vaccines.
We’re fortunate to be in Texas, where the pro-business approach creates a magnet for corporate relocations, driving job and population growth. As a result, out-of-state retailers that may not have considered locations here before now have Texas in their sights. They are targeting the state because they see how well retailers can do here — even during the pandemic — relative to the West Coast and Northeast.
With 2021 promising a greater re-opening of the economy, we expect the current year to be one of recovery, with a return to the pre-pandemic economic health by 2022.
— This article originally appeared in the March issue of Texas Real Estate Business magazine.