Now Is An Opportune Time To Renovate Older Shopping CentersGeneral Real EstateUpdated on Aug 16, 2010 View more like this | Visit PLAINFIELD, NJ | Contact Caryl Communications, Inc. |
Many older shopping centers could become significantly more competitive if they were updated, and now is an opportune time to do so; construction costs are down, materials and labor are readily available, and strong companies can secure financing at a good rate.
The New York metropolitan area, despite today’s market fundamentals, remains a great place for retail. Here, where barriers to entry and the struggling economy have made ground-up development a near impossibility, an owner can derive even more value out of a renovation: the physical upgrades can help to attract tenants, and may support higher rents. However, in general, surprisingly little renovation is taking place.
Within this context, we continue to find that carefully planned renovation projects at well-located properties provide an opportunity to take advantage of current conditions, and that the resulting upgrades help us justify the investment cost.
In Hamilton Twp., N.J., for example, we’ve launched an approximately $15 million renovation at Hamilton Plaza Shopping Center in conjunction with the expansion of ShopRite, the property’s long-time anchor. The project will reconfigure, expand and update the 184,272-square-foot property. At the heart of the plan, a portion of the front section of the building will be removed, and additional square footage will be added to the rear, allowing the expanded ShopRite to reach nearly 86,000 square feet, while adding parking near the entrance.
The project will also add a 10,000-square-foot end cap to the building, as well as two new pad sites, for a net gain of approximately 5,000 square feet of GLA. The plan also includes installing prominent new pylon signage and a modern building façade, reconfiguring the parking lot, and redesigning and adding to the center’s landscaping.
All told, this is a fairly significant investment today. But Hamilton Plaza is a property with significant upside potential, and the addition of the pad sites and new end cap will create even more. The renovation also puts Hamilton Plaza – an older property built in 1961 – into a strong competitive position: our client will end up with a property that looks like it was just built.
Our history indicates that our approach yields long-term profitability. North Village Shopping Center in North Brunswick, N.J., today has a tenant list that include Barnes & Noble, Michael’s, Bed Bath & Beyond, Annie Sez and Chili’s. But 10 years ago, some 120,000 square feet of the center’s 128,000 square feet sat vacant. We reconfigured the property, shaving 40 feet of depth off the front of the building to fit a “big box” footprint, and installed a new façade, expanded parking and upgraded landscaping. Within a year, the center was fully leased and had re-established itself as one of that submarket’s dominant retail destinations – a position that it continues to hold today.
REBUILD OR RENOVATE?
In Pelham Manor, N.Y., Post Road Plaza was clearly in need of updating. Rather than demolish a former K-mart building, we opted to keep the 208,000-square-foot structure. Our renovation took the façade down to the steel and reskinned it, a large amount of work to be sure, but much less than starting from scratch. The $10 million project brought a totally new look to the property, creating a post-industrial feel that fits well with the area; it upgraded lighting, paving, and landscaping and also included an innovative signage program that immediately appealed to our tenants.
In terms of leasing, the result was highly beneficial. Fairway Market, the iconic New York grocery chain, opened there in April 2010, occupying approximately 75,000 square feet. Long-time tenant Modell’s Sporting Goods expanded into a 22,000-square-foot, two-story store. In fact, all previous tenants opted to remain at the center, and many renovated or expanded.
The challenge that all owners and property managers face is to spend wisely and to maximize return on investment. And with a renovation, the amount to be spent is large. So the return must be large as well.
Yet the opportunity to undertake shopping center renovations more easily and cost effectively right now is well worth noting. Shifting a mindset from building or rebuilding – or doing nothing more than deferring necessary repairs – to that of renewing an existing, well-located shopping center oftentimes yields the best route for getting the most out of every dollar invested. Employing flexibility, solid capabilities and vision along that route can lead to increased value, better positioning and a prosperous future.
The New York metropolitan area, despite today’s market fundamentals, remains a great place for retail. Here, where barriers to entry and the struggling economy have made ground-up development a near impossibility, an owner can derive even more value out of a renovation: the physical upgrades can help to attract tenants, and may support higher rents. However, in general, surprisingly little renovation is taking place.
Within this context, we continue to find that carefully planned renovation projects at well-located properties provide an opportunity to take advantage of current conditions, and that the resulting upgrades help us justify the investment cost.
In Hamilton Twp., N.J., for example, we’ve launched an approximately $15 million renovation at Hamilton Plaza Shopping Center in conjunction with the expansion of ShopRite, the property’s long-time anchor. The project will reconfigure, expand and update the 184,272-square-foot property. At the heart of the plan, a portion of the front section of the building will be removed, and additional square footage will be added to the rear, allowing the expanded ShopRite to reach nearly 86,000 square feet, while adding parking near the entrance.
The project will also add a 10,000-square-foot end cap to the building, as well as two new pad sites, for a net gain of approximately 5,000 square feet of GLA. The plan also includes installing prominent new pylon signage and a modern building façade, reconfiguring the parking lot, and redesigning and adding to the center’s landscaping.
All told, this is a fairly significant investment today. But Hamilton Plaza is a property with significant upside potential, and the addition of the pad sites and new end cap will create even more. The renovation also puts Hamilton Plaza – an older property built in 1961 – into a strong competitive position: our client will end up with a property that looks like it was just built.
Our history indicates that our approach yields long-term profitability. North Village Shopping Center in North Brunswick, N.J., today has a tenant list that include Barnes & Noble, Michael’s, Bed Bath & Beyond, Annie Sez and Chili’s. But 10 years ago, some 120,000 square feet of the center’s 128,000 square feet sat vacant. We reconfigured the property, shaving 40 feet of depth off the front of the building to fit a “big box” footprint, and installed a new façade, expanded parking and upgraded landscaping. Within a year, the center was fully leased and had re-established itself as one of that submarket’s dominant retail destinations – a position that it continues to hold today.
REBUILD OR RENOVATE?
In Pelham Manor, N.Y., Post Road Plaza was clearly in need of updating. Rather than demolish a former K-mart building, we opted to keep the 208,000-square-foot structure. Our renovation took the façade down to the steel and reskinned it, a large amount of work to be sure, but much less than starting from scratch. The $10 million project brought a totally new look to the property, creating a post-industrial feel that fits well with the area; it upgraded lighting, paving, and landscaping and also included an innovative signage program that immediately appealed to our tenants.
In terms of leasing, the result was highly beneficial. Fairway Market, the iconic New York grocery chain, opened there in April 2010, occupying approximately 75,000 square feet. Long-time tenant Modell’s Sporting Goods expanded into a 22,000-square-foot, two-story store. In fact, all previous tenants opted to remain at the center, and many renovated or expanded.
The challenge that all owners and property managers face is to spend wisely and to maximize return on investment. And with a renovation, the amount to be spent is large. So the return must be large as well.
Yet the opportunity to undertake shopping center renovations more easily and cost effectively right now is well worth noting. Shifting a mindset from building or rebuilding – or doing nothing more than deferring necessary repairs – to that of renewing an existing, well-located shopping center oftentimes yields the best route for getting the most out of every dollar invested. Employing flexibility, solid capabilities and vision along that route can lead to increased value, better positioning and a prosperous future.
