Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, June 24, 1990 TAG: 9006210495
SECTION: BUSINESS PAGE: B-2 EDITION: METRO
SOURCE: Sandra Kelly
DATELINE: LENGTH: Medium
The Roanoke region is no exception, according to Mike Klump, vice president with Leo Eisenberg Co. The St. Louis-based company is developer of the 85,000-square-foot Lakeside Plaza in Salem.
Centers built by BD&E of Nashville and those developed with Food Lion supermarkets as anchors are a big chunk of that flood, he said.
The impact, Klump said, can be seen at Roanoke's Southwest Plaza, which gave Lakeside competition and allowed tenants to shop around for the best rates.
"Shortly after we got into Lakeside three additional Food Lion centers were announced, Klump said. "There was a Winn-Dixie shopping center added in Vinton. The Hunting Hills Plaza was announced. The centers basically flooded the market with space. There were not enough tenants to absorb the space," he said.
He said the availability of space brought rents down by several dollars a square foot.
"Our project at Lakeside suffered," he said.
Klump said that although the Lakeside center is 96 percent leased with only about 3,000 square feet empty, rents have not recovered from the overbuilt period.
Retail rental rates in the Roanoke area range from $8 to $12 a square foot a year with $10 as an average, said Millie Moore, retail leasing specialist with Hall Associates. Moore said an exception in rates is Townside Festival where developer Bruce Hobart has stuck to $14 a square foot.
"Retailers know where there is a lot of space on the market and they expect to get good deals," Moore said. She said it is not unusual for a landlord to give free rent or concessions such as free carpeting to get a tenant into a center where leasing is lagging.
Moore stressed the importance of small shops to a center's success. "You cannot have a successful shopping center based on an anchor store," she said.
Moore's 1989 survey, released in November, showed that the Roanoke Valley had a 12 percent vacancy rate calculated on 20 centers of 50,000 square feet and above. Her survey did not include the grocery store strip centers, such as those by Food Lion.
Moore said last week that if Crossroads Mall, Towne Square, The Plaza of Roanoke-Salem and Hunting Hills Plaza were eliminated from her survey, the vacancy rate would go down to 5 percent.
The vacancy rate was 5 percent in 1988. It went up to 14 percent this year, but probably is back to 10 percent since Heironimus department store announced it is going to open at Spartan Square in Salem.
Moore's survey pointed out that the amount of retail space grew by 16 percent last year.
The same sort of overbuilding happened in the New River area in the past few years. For example, the 456,000-square-foot New River Valley Mall, The Market Place and a nearby strip center were announced about the same time in 1987.
"The Fashion Bugs of the world said `Should I go to Blacksburg, Christiansburg or should I go to the mall?' " Klump said.
The Western Virginia situation mirrors the national picture, Klump said.
"Real estate in general nationwide is experiencing some deflation now because of overbuilding in a lot of markets," Klump said.
To overcome the surplus space, Klump said, some projects will have to be reworked and perhaps turned into office centers.
Despite the real estate developers' woes, Klump said tenants in the centers appear to be doing well.
"The Roanoke market softened out, but I think it will get stronger," Klump said. "I think people will leave some ill-conceived centers and migrate to more visible centers. I think the economy of Roanoke is fairly strong."
by CNB