Western Real Estate Business

SEP 2017

Western Real Estate Business magazine covers the multifamily, retail, office, healthcare, industrial and hospitality sectors in the Western United States.

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56 • September 2017 • Western Real Estate Business www.REBusinessOnline.com RETAIL REDEVELOPMENT: A VIEW FROM THE CONSTRUCTION TRAILER While store closures may garner top headlines, one construction company's pipeline shows the retail environment is still very much alive and well — albeit shifting in this new economy. By Tim Hanifin S ome say that the shopping center is dy- ing, but the view from the construc- tion trailer says otherwise. Since the retail industry took an almost un- preceded plunge between 2007 and 2009, we've watched the retail construction pipeline return slowly and steadily through a demand for modern and engaging retail space. In the process, it has generated a cau- tiously optimistic market outlook, with most research reports predicting a 5 percent increase in new construc- tion this year alone. That's not to say things aren't changing. Online shopping contin- ues to proliferate, causing retailers to consider smaller store footprints and pressuring owners to incorporate ex- periential elements designed to entice shoppers away from their favorite on- line retail sites and into their favorite retail stores. On the construction front, these trends have created some com- mon outcomes and challenges. Changing Store Models Spur Construction In many cases, shrinking retailer footprints are actually growing the retail construction pipeline, particu- larly with the redevelopment of older malls. At Northridge Mall in Salinas, Calif., JC Penney's desire to move to a smaller, one-story model within the mall proper became the impetus for a major mall reconfiguration. During this process, JC Penney's former two- story, 125,000-square-foot store will be transformed into a center court atri- um. This atrium will more efficiently link shoppers to Macy's and Sears, and add additional modern, in-line retail and restaurant space. As more anchor stores make the shift from large store models, we may likely see a larger abundance of these exciting redevelopment projects. Structural and Life Safety Modifications A call to improve or integrate con- temporary entertainment concepts within shopping centers is also push- ing redevelopment. From a construc- tion standpoint, this comes with one major challenge: ceiling height. A two-story roofline at Northridge Mall in Salinas will allow reconfiguration to occur with only some structural changes. In contrast, a 110,000-square- foot expansion at Santa Clara's West- field Valley Fair, which includes the addition of a Kerasotes ShowPlace ICON Theatre, could not be achieved by re-using existing building space. Instead, a new two-story shell build- ing is being built to house the new the- atre. In addition to structural changes, owners should be prepared for the added fire protection, exit plan and similar code considerations required when transforming space from a retail to entertainment use. Operating in a Live Environment Performing construction in a live environment where stores are open and generating revenue is a natural part of retail redevelopment. Though it comes with its distinct challenges, great results can happen when proj- ect stakeholders work collaboratively and engage early to address live envi- ronment considerations that help con- struction teams buy, plan, schedule and execute according to the unique needs of the client. What shut-down, noise control, security or housekeep- ing adjustments need to happen to maintain patron safety? Can a tempo- rary graphics plan make barricades and fencing look attractive while pro- tecting shoppers from construction zones? What timelines need to shift to avoid operational disruptions? At Westfield Valley Fair, we recently moved a concrete pour to off-hours so it would not disrupt an active daytime loading dock. Demographics Drive Feasibility Experience shows shopping centers with solid traffic count and strong shopper demographics have the right fundamentals to handle a redevelop- ment in stride. Graycor is currently managing about $100 million in con- struction activity in Northern Califor- nia that is all related to retail redevel- opment and all supported by densely populated Silicon Valley communities that have highly active, highly skilled population bases. These types of com- munities prove that, while the com- mon narrative about online retail overrunning bricks and mortar per- sists, the physical retail store remains a critical part of the consumer buying process. The best opportunities in the years ahead may lie in safely and effi- ciently bringing all of these spaces up to today's new shopper standards. Tim Hanifin, Vice President and General Manager, Graycor Construction Company Inc. A new two-story shell property is being built to house the new Kerasotes ShowPlace ICON Theatre at Westfield Valley Fair in Santa Clara, Calif. Hanifin Small Balance Bridge Loans Multifamily & Commercial $3,300,000 Refinance Retail $1,813,500 Refinance Office $3,134,800 Purchase Light Industrial Recent Transactions Loan Amount $1,000,000 to $5,000,000 States Western States, TX, FL, IL LTV Multifamily LTV up to 70% Comme Commercial Real Estate LTV up to 65% Terms Up to 3 Years Fixed, I/O with Balloon No Prepayment Penalty Option Non-Recourse Available This communication is intended for real estate professionals only. Rates and terms sub- ject to change without notice. Wilshire Finance Partners, Inc. CA Bureau of Real Estate Broker Lic. #01523207 and CA Department of Business Oversight Lic. #603K729 (800) 594-9457 WRE@wilshirefp.com Los Angeles Office | 1990 South Bundy Drive, Suite 630, Los Angeles, CA 90025 Mission Viejo Office | 25950 Acero Drive, Suite 345, Mission Viejo, CA 92691

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