Plano City Leaders Eye Four-Corner Retail Centers For Reinvestment Opportunities
Nearly 40 years after Plano city leaders decided to use intersections of major thoroughfares as home bases for retail, a new roster of decision-makers is devising ways to keep these four-corner centers thriving for years to come.
Plano counts a hefty 99 such retail centers of more than 25K SF across the 72-square-mile city, according to Weitzman, comprising just under 13M SF — much of which is clustered around major intersections.
Over the next three to five years, Plano Director of Special Projects Peter Braster plans to pay special attention to these centers, ensuring those that have operated successfully continue to do so in the long term.
“When we talk about retail rehab, it’s not because we think it’s bad, we just don’t want it to get that way,” Braster said.
This spring, Braster’s department plans to propose a policy that would outline an approach to the revitalization of Plano’s retail centers. The city grew east to west, so it is likely that older properties on the east side of town will be addressed first.
Already, the city has wrapped up a project at 18th Street and K Avenue, one of the oldest centers in Plano. A Safeway built around 50 years ago was replaced by a new anchor tenant, Green Vine Market, which approached Braster and his team about working together to revive the property.
The city used funds from the area’s tax increment reinvestment zone to not only help Green Vine Market upgrade the building’s facade but also add new landscaping, Braster said. The work inspired other tenants to improve their buildings, he added.
“It was really a test case on how to incentivize people who are redoing their center or want to redo their center to make it even more than they had originally planned because of their budget,” he said.
Not every shopping center will have access to TIRZ funds, but there are other ways to encourage revitalization. The cities of Carrollton, Lewisville and Irving have incentive programs specific to retail rehab projects, which Braster said could also work in Plano.
Revitalization projects cost money, but in the case of public-private partnerships, both sides of the equation have something to gain from taking the plunge, said Randy Stebbins, Weitzman’s executive vice president and director of asset management.
Owners tend to see notable increases in rental rates, revenue and occupancy. Plano’s retail vacancy rate is around 9.5%, according to Weitzman, which is slightly higher than neighboring Frisco’s 8%.
The city’s coffers are padded, too. According to restaurant analytics firm Delaget, remodels can translate to sales increases of between 15% and 40%.
“Having a vacant shopping center hurts not just the owner or developer of the property, it affects tax and values for the city itself,” Trademark Property Co. Senior Director of Development Monica Luera said. “So that’s an obvious benefit, along with the adjacent property values increasing.”
There are some challenges to pulling off a revitalization project. Retail centers often have a patchwork of ownership, which challenges developers and cities to convince various parties the juice is worth the squeeze.
“You don’t want to make an investment if you’re not going to get a return on it,” Stebbins said. “In a retail shopping center, if an owner is willing to make those investments, they’d like to see some sort of return either in valuation or in some sort of an increased income stream.”
In general, redeveloped shopping centers tend to command higher rents by attracting more profitable tenants. According to Luera, repositioning projects undertaken by Trademark have increased net operating income by between 25% and 50%.
Changes to existing tenancy is one of the first things Trademark looks at when starting a retail rehab project, Luera said. The idea is to have a mix of businesses that attract customers at various times of the day, she said.
“It’s all about keeping the shopping center active longer,” she said. “You don’t want times where it’s quiet because all of the clothing or retailers have closed early. You want restaurants, yoga studios, hair salons, spas that run later into the evening hours.”
Bringing in nonretail uses, such as apartments, office space or hotels, may also make centers more vibrant. Not every four-corner center is suited for mixed-use, Braster said, but in some cases it may serve to improve long-term value and investor appeal.
Measuring retail visits in days instead of hours is the ultimate goal for Steerpoint Capital, a private equity investment firm that focuses on repositioning underperforming retail centers in Southern California and the Sun Belt states.
“If we can get more residential on-site, if we have guests staying overnight, they will naturally become our shopper,” Managing Partner Bo Okoroji said. “That’s what drives discussion, 60 minutes on property, to 24 hours, to two-three day average stays.”
As shopping habits change and retailers begin to rethink their physical space, cooperation and forward-thinking mentalities on the part of city councils are essential to the success of retail revitalization, Luera said. Being flexible with zoning, especially in centers that could benefit from a mix of uses, is incredibly helpful, she added.
“Sometimes when zoning ordinances, when they’re put in place, the direction of what’s going on in the market is one way, but things may change,” she said. “There are lots of ways to get to where we all want to be.”
Braster said he expects city leaders will bend on changes where they make sense. Ultimately, he said their goal is to improve the quality of life of residents and stakeholders by making sensible upgrades.
“If [retail centers] are doing well, then the neighborhood is doing well, and I think it’s a bellwether for how people think their neighborhood is,” he said. “People are proud of their neighborhoods — we also want them to be proud of the retail centers next to them.”