Retail development is changing at its core. Developers at Bisnow’s Austin retail event say it’s become a much more specialized and difficult industry.
Endeavor principal Ben Bufkin (snapped with VCC’s Nick Carsten and Mitch Evans) says retail developments are becoming very difficult to put together. Capital sources are making developers really prove that their deals will work and what makes them unique. That’s preventing companies from using the same general design across the country; capital is pushing for projects that are specialized not just to cities but to neighborhoods. It’s good for the market and creates higher-quality centers, Ben says, but it’s upped the difficulty and timeline. And of course that’s all after a hard fight to find a site; Southwest Strategies Group principal John Rosato says it’s hard to find locations that make economic sense, especially since everyone in the country wants to build in Downtown Austin.
Location is becoming less important to retail, says GroundFloor Development founder Brandon Bolin—now the “destination” is king. Think Moon Tower or Justine’s: People will travel to get somewhere they love. The trick is to create something beautiful and organic; if it feels overdone or contrived, people won’t feel comfortable, Brandon says. The further you’re asking people to travel, Ben says, the more authentic and unique the project needs to be. Sometimes that means a one-of-a-kind lineup, and sometimes that means a place people enjoy lingering.
Here’s our developer panel: moderator Padgett Stratemann & Co partner Kevin Fincher, Ben, John and Brandon.
Tenants have gotten more sophisticated, John (right, with Resolana Architecture’s Kelly Mahan) says, and they don’t just want any old box in a good spot. They’re negotiating co-tenancy more, and they want to be part of a community. Tenant collaboration and customization are also picking up. Ben says developers used to build more modular projects that tenants would fit into. But now more often they’re building with tenants in mind or letting tenants create their own look. Endeavor’s Rock Rose project (Phase 1, 100k SF anchored by Nordstrom, just opened, and the remaining 500k SF will follow Sept. 30) looks like West 6th or South Congress because Endeavor’s letting tenants have more control over their design and build custom.
Austin’s retail market has more demand than supply, and Kevin says it’s leapt up to 96% occupancy. (We found Kevin, left, with VertsKebap founder Michael Heyne.) Typically Austin’s in the 88% to 90% range when it’s healthy. But don’t get too comfortable, Ben says—retail is a boom or bust market, so vacancy can shoot up quickly. In fact, all of our developer panelists are keeping their eye out for a correction. None ventured a guess about when or necessarily saw any signs pointing to a downturn (on the contrary, Brandon says that as long as people keep moving here—and there’s no end in sight there—we’ll need more retail development). But all our experts repeatedly mentioned that this boom has been going on a while, and things will slow down sooner or later.
