One of the hardest-hit real estate segments, both in Cleveland and across the nation, has been the retail sector. A dramatic reduction in consumer spending over the past four years has caused significantly lower retail sales and resulted in a long list of bankrupt retailers and struggling retail centers.
While the pullback by the consumer has ultimately led to numerous instances of shuttered stores and bank-owned retail centers across the region, there have also been some noticeable trends that illustrate the underlying resiliency and strength of this segment.
Digging in the dirt
Although the pace of retail development has been at a near standstill for the past few years, some projects have begun to take shape. The furthest along is a new 86,000-square-foot Giant Eagle in Broadview Heights, which is under construction with an early 2012 opening planned.
The South Euclid/Cleveland Heights area has also emerged as a favored development location with two large-scale projects. The long-planned expansion and renovation to the northern half of Cedar Center began in the spring with the construction of a new GFS Marketplace.
When fully completed in late 2012, this project is expected to contain approximately 60,000 square feet of total retail as well as residential and office space.
A much larger development, known as Oakwood Village, is close to breaking ground thanks to the recent successful rezoning of a portion of the project. This 106-acre mixed-use development straddles Cleveland Heights and South Euclid, and will include large-format and traditional in-line retail, as well a residential component and a 21-acre park. Construction is expected to begin in early 2012.
Finally, Crocker Park, a 1.2-million-square-foot lifestyle center in Westlake, was recently selected as the new home for the headquarters of American Greetings. The project is expected to ultimately encompass 3 million square feet, including new office, retail, residential and hotel components. The American Greetings facility will be completed by 2014.
Trading up
Depressed pricing in the general real estate market has provided clear opportunities for several strong retailers to improve their positioning in established, built-out communities. McDonalds is a great example.
The fast-food giant has secured redevelopment sites with much better visibility and accessibility compared to their current locations in the densely populated municipalities of Cleveland Heights and Lakewood.
Cleveland-based KeyBank has also been active, constructing retail branch banks on in-fill locations in Lakewood, Lyndhurst, Highland Heights and Independence over the past 24 months.
Meanwhile, Sonic has continued its slow, but steady, expansion into the region by recently redeveloping a former KFC in Mayfield Heights. And Wal-Mart has stepped up efforts to freshen and expand several of its stores, most notably in Macedonia, Stow and Boardman.
Switching out
The storefronts left vacant by bankrupt large-format retailers have provided well-located, high-visibility locations for retailers new to the market or looking to expand their coverage.
The Borders bankruptcy has opened the door for several different retailers to enter the market, including ULTA (Solon) and Books-A-Million (Cuyahoga Falls and North Canton).
Closed locations of Blockbuster Video have also been popular, with Advanced Auto, AutoZone, America’s Best Eyeglasses and Anytime Fitness, each snapping up at least one former location of the troubled video rental chain. Advanced Auto and AutoZone had existing locations in Cleveland while America’s Best Eyeglasses and Anytime Fitness are new to the market.
Pittsburgh-based Levin Furniture expanded its regional footprint by replacing a former Linens ’n Things junior anchor location in Avon, as did HH Gregg, which replaced a former Circuit City in Mentor.
Branching out
Despite the continued struggles of many retailers, several chains have made aggressive pushes into the Cleveland market. In an odd paradox, two of the most active categories have been fitness facilities and ice cream/frozen yogurt stores.
Examples of the former include Fitness 19, CrossFit and, as previously mentioned, Anytime Fitness. Examples of the latter include Menchies, Yogurt Vi and Robeks.
All of these retailers have opened multiple locations over the past 24 months and continue to actively work on new locations. Nearly all of these stores have opened in existing storefronts rather in new developments.
The retail segment may be down, but these examples illustrate that it certainly is not out. The prolonged shakeout has been difficult, but a healthier, stronger market is emerging. And as the economy begins to improve, this market should be in a much better position for recovery.
— Alec Pacella, CCIM, is a senior vice president specializing in investments with NAI Daus Commercial Real Estate Services in Cleveland.