ATLANTA — Some developers in the Southeast are scaling back, delaying and rethinking major projects, including the retail components, because of the weakening economy.
This story first appeared in the October 7, 2008 issue of WWD. Subscribe Today.
The International Council of Shopping Centers’ Southeast Conference at the Georgia World Congress Center here on Monday was dominated by discussions about turmoil in the economy and the impact on retailing.
The fallout from the credit squeeze, rising unemployment and stock market upheaval have compelled consumers to cut spending. The result has been that major projects, such as The Sembler Co.’s Town Briarcliff, a Northeast Atlanta mixed-use project planned for 1.5 million square feet of retail, has been downsized to 300,000 square feet. Overall, Sembler said leasing efforts, especially in the apparel sector, stalled after holiday 2007 and haven’t improved. The company has 128 shopping centers and 23 million square feet of retail, mostly in the Southeast.
“It’s an exciting time to be in business — except for the collapse of the financial markets along with credit and leasing efforts, we haven’t been affected at all,” Jeff Fuqua, president of Sembler, said facetiously.
Another development, Atlanta’s Streets of Buckhead, a $1.5 billion mixed-use project set to open its first phase next year, has postponed 300,000 square foot of office space and its two hotels.
“Five-star hotels are hard to capitalize now,” said Steven Cadranel, partner and president of Ben Carter Properties, the Atlanta-based developer of Streets of Buckhead.
However, Cadranel said 360,000 square feet of retail will be 60 percent leased by year’s end, with commitments from luxury stores including Hermès and Oscar de la Renta.
Wal-Mart Stores Inc., which had been opening 10 new stores a year in Georgia, has cut back to three to four for both 2008 and 2009, said Van Westmoreland, president of Westmoreland Co., an Atlanta-based commercial brokerage and development firm that develops sites for Wal-Mart. A Wal-Mart spokesman confirmed that the retailer is slowing store openings, but added that “there is no magic number.”
Merchants “are dropping their forecasts…for the next two years,” said Brian Lefkoff, senior vice president of Colliers Spectrum Cauble Realty LLC in Atlanta, whose clients include Macy’s and Dress Barn. “They’re doing deals, but are aggressive on rent rates, and they are leaner and meaner, looking at smaller formats.”
Despite economic woes, some speakers stressed the cyclical nature of retail, noted opportunities and challenged developers to create enticing formats such as hybrid centers of sports, retail and entertainment, and organic grocery store concepts.
Mary Lou Fiala, ICSC chairwoman and president and chief operating officer of Regency Centers, a Jacksonville, Fla., shopping center developer, said, “It’s easy to say the whole industry of retail is underperforming, but it is dependent on the category and other factors. We always work our way through [economic downturns]. It’s time to hunker down and be smart in our business strategies.”
Discount real estate has “lots of activity,” said Ruth Coan, partner at Atlanta-based real estate firm The Shopping Center Group. Coan cited stores with national expansion plans, such as Burlington Coat Factory, which is to open 50 units next year.