Weitzman recently released its San Antonio 2018 mid-year retail report. Despite large-format store closings during the first half of the year, the market is maintaining an occupancy rate of 94%, thanks to steady retail demand and extremely limited construction. Connect Media recently posted this Q&A with Weitzman Senior Vice President Marcus Shaffer originally ran in Connect Media.
Q. How big of an impact are you seeing from the closed Toys “R” Us and Sears stores?
A. The Toys “R” Us stores only accounted for a little more than 130,000 square feet. It’s never good to see a retailer close, but when it happens in a strong market like our current retail environment, we don’t expect to see a long-term negative impact. In the short term, the Toys closings, along with a 214,000-square-foot Sears’ closure and some other one-off closings, could cause some slight flattening or decline in occupancy by year-end. But we continue to see new concepts lease existing vacancies, so the outlook is good.
Q. The recent Weitzman mid-year report noted that, based on what is in the works, construction this year could total approximately 300,000 square feet. Why is construction so conservative in the face of a booming San Antonio economy?
A. This isn’t just a San Antonio trend. Throughout our Texas markets, we’re seeing near historic lows for new construction. One reason San Antonio’s new construction is so low is that our major grocers like H-E-B and Walmart brought a significant number of new stores online over the past several years, so it’s natural there would come some years with no new grocers. For 2019 and 2020, we expect to see construction increase quite a bit. For 2019, just the new IKEA in Live Oak will mean that year’s construction totals will top those from 2018. And a number of major projects, like power center The Shops at Dove Creek and a new Sprouts-anchored project, will also be underway. A number of entertainment anchors are also in the works.
Q. The report mentions that, in the low construction market, expanding retailers are leasing existing-center vacancies. What are some examples of this?
A. Burlington’s lease of a former 42,000-square-foot Sports Authority is one of the larger examples. Restaurants, which are extremely active, are also often expanding via existing space. 54th Street Restaurant and Drafthouse is demolishing a former bank site to build a new 8,600-square-foot restaurant to open next year, and Walk-On’s Bistreaux & Bar opened earlier this year in a 10,000-square-foot second-generation space. The location is the second in the market for the concept. And Spec’s is opening in part of a former JCPenney HomeStore at Ingram Festival, a center peripheral to Ingram Park Mall. Other expanding concepts, especially small-shop concepts, are those like fitness, food, beauty, medical-dental and services, which all can be considered largely Internet-resistant.