Microcosms of Retail Development

Virtually every retail development trend at work in the United States can be found in New Jersey, Connecticut, and Pennsylvania. Together those trends form a microcosm of retail development. “New Jersey is two states with two kinds of retail development,” said Jarrett Wells, managing director of branch sales and leasing with American Financial Realty Trust in Jenkintown, Pa. American Financial owns and leases high-rise and branch banking properties across the country. Wells manages hundreds of retail branch banking properties in key markets across Connecticut, New Jersey, and Pennsylvania.

“Northern Jersey combines solid demographics with high incomes,” Wells said. “Largely built out, it presents opportunities for infill development and redevelopment. Anti-growth sentment runs strong in the north, making entitlements difficult.”

In the southern half of New Jersey, continued Wells, areas around Philadelphia and the coastal Atlantic City are flourishing. But the rest of the south is less densely populated than the north. Developers can find opportunities but must deal with objections raised by powerful slow-growth advocacy groups.

“Developers have gone crazy in Connecticut,” Wells said. “Greenwich remains one of the most sought-after markets for all retailers. But small and large cities and suburbs in other parts of the state are catching up.”

Pennsylvania is also two states. The east with Philadelphia fits easily into the quick rhythm of the Northeast. But the western part of the state with Pittsburgh and Erie is Midwestern in character.

Philadelphia, New Jersey: Philadelphia sits on the New Jersey border and forms a key link in the megalopolis that runs from Washington, D.C., north through Philadelphia, New Jersey, New York City and Boston.

Philadelphia and southern New Jersey are part of a single diverse retail development market. “We have eight malls in the Philadelphia market,” said Joseph F. Coradino, president of PREIT Services, LLC in Philadelphia. “We’re spending more than $300 million to redevelop properties in the Philadelphia area.”

To Coradino, the Philadelphia area includes the Voorhees Town Center (formerly Echelon Mall) in Voorhees, N.J., and the Cherry Hill Mall in Cherry Hill, N.J., just across the Pennsylvania line from Philadelphia as well as Philadelphia suburbs inside Pennsylvania.

PREIT has turned Echelon Mall into the 700,000-sq.-ft. Voorhees Town Center. The company tore down half of the old mall and renovated the remaining half, leaving it enclosed between bookend anchors—Macy’s and Boscov’s.

The space freed up by the demolition is getting a lifestyle center retail development with 50,000 sq. ft. of office space and 425 apartments above the retail.

At the Cherry Hill Mall, PREIT is adding a Nordstrom, Container Store, and Crate and Barrel. The renovation also built six sit-down restaurants into the front wall of the mall. It’s a new idea, Coradino said, to put that space to work.

“Across the river in Plymouth Meeting [Pa.], we’re doing a European concept at Plymouth Meeting Mall,” Coradino said. “In Europe, grocery stores are at the mall or hypermarket, and we’re adding a new Whole Foods Market to a mall anchored by Macy’s and Boscov’s. We’re also adding new lifestyle tenants.”

North of Philadelphia, in Garwood in central New Jersey, ARC Properties, Inc. of Clifton, N.J., has turned an old factory into a mixed-use Main Street center with retail on the first floor and residential above. Called The Mews at Garwood, the project will ultimately include 160 residential units and 60,000 sq. ft. of retail.

Both central and northern New Jersey feature enormous barriers to entry, noted Bob Ambrosi, president of ARC. “The competition is incredible; the prices for land are outrageous; and the terms are extremely difficult.”

Nor do local and state jurisdictions provide much in the way of tax incentives, although they frequently ask for givebacks in the form of infrastructure improvements.

ARC’s ability to work in such a difficult market stems in part from its environmental remediation skills. “We’re a poster child for brownfield projects,” Ambrosi said. “Every site in northern Jersey has some kind of environmental problem: groundwater contamination, soil problems, asbestos—something that developers have to deal with.”

While development is easier in southern New Jersey, Ambrosi noted that state and local governments require developers to design extra green space into projects. “For projects east of the Garden State Parkway and along the Atlantic Coast, any project with more than 49 parking spaces must get additional permits and add special green areas,” he said.

The Connecticut microcosm: As it grows more and more expensive to live in New York City and the surrounding New York and New Jersey suburbs, Connecticut developers are finding development opportunities, said Wells of American Financial. “Many opportunities will be for infill and redevelopment projects,” he said. “But nothing is easy. There are powerful groups with deep pockets aligned against development. These groups may have a lot to say about development projects.”

Likely questions will concern remediation of environmental problems created by the previous uses, continued Wells. Other questions will probe possible environmental problems that may be created by a proposed new use. “In the end, a percentage of the anti-growth community will always feel that parks are a better alternative than retail development,” said Wells.

The midwestern half of Pennsylvania: Western Pennsylvania is Midwestern in character. Life there is slower paced than in the Northeast, reflective rather than impulsive. While no one would call Pittsburgh or Erie rural, neither is by any stretch of the imagination cosmopolitan.

Located right on Lake Erie, the Pennsylvania city of Erie has much in common with cities in western New York as well as cities in Midwestern states such as Illinois, Ohio, Michigan and Wisconsin—the Great Lakes states.

Erie even attracts Midwestern developers. The Youngstown-based Cafaro Co., the largest privately owned shopping center developer and operator in the United States, owns the Millcreek Mall in Millcreek Township, just south of Erie.

The Millcreek Mall is the one of the largest malls in the country. Spanning 2.1 million sq. ft. and accommodating 241 stores and seven anchors on a single floor, it seems as big as the entire Midwest.

Like the Midwest, western Pennsylvania offers expanses of undeveloped land. Just 18 miles southwest of Pittsburgh, for example, stands the borough of Canonsburg, once noted only for its role as the home of the Whiskey rebellion of 1794.

Since then it has become an impressive retail market with a trade-area population of 900,000 and an average household income of $73,779 within a 10-mile radius. Businesses within 10 miles employ 130,190 people.

Those demographics spawned the 800-acre master-planned community of Southpointe, in metro Pittsburgh. In a joint venture with Horizon Properties, which developed South-pointe, another Midwestern developer, Cullinan Properties, LTD of Peoria, Ill., is currently developing the 55-acre Southpointe II Town Center. The site is in the middle of the original Southpointe office development, where 10,000 employees work.

“There are lots of rooftops here, but those office workers are the sweet spot for the Town Center,” said Chuck Boysen, Cullinan’s director of marketing and lease management.

The Town Center will include lifestyle and power-center layouts, with office and residential space above. Plans call for 750,000 sq. ft. of retail.

Connecticut, Pennsylvania, and New Jersey are the United States in microcosm. They are part of the Northeast megalopolis. They offer coastal tourist cities. They have sprawling suburbs and rural small towns. And through western Pennsylvania, they reflect the upper and lower Midwest. What more could a retail developer want?