Retail follows 3 trends in Northern Colorado

Scheels All Sports Store
Scheels All Sports Store, at Interstate 25 and U.S. 34 in Johnstown, is a 250,000-square-foot sporting goods store that is anticipated to open in October 2017. Courtesy Chrisland Real Estate Cos.
Ryan J. Schaefer CEO, Chrisland Real Estate Cos., Fort Collins

Ryan J. Schaefer
CEO, Chrisland Real Estate Cos., Fort Collins

The redevelopment of two regional malls, Costco’s long-awaited opening and a highly unique retailer’s search for a Northern Colorado site have made for some interesting story lines over the past several years. The continued evolution of retail has been ever present in how these projects have taken shape and provides clues as to what to expect in the future.

Before delving into the aforementioned projects, it is important to recognize three big picture trends, which have shaped post-recession brick-and-mortar retailing: the continued growth in online shopping, sluggish growth in wages and an increase in personal savings.

In her June 8, 2016 Wall Street Journal article, Laura Stevens reported on an annual survey by UPS and comScore Inc. that polled shoppers who made at least two online purchases in a three-month period (excluding groceries) about their shopping behavior. Some of the key results of this survey were:

  • 2015 marked the first year that shoppers made more purchases online (51 percent) than in brick-and-mortar stores.
  • Shoppers reported that only 20 percent of their purchases were made in a store the conventional way, which meant going to a store, browsing and buying there – down from 22 percent a year ago.
  • 42 percent chose to search and buy entirely online.

The continued growth of online shopping has had a dramatic impact. This major behavioral trend coupled with sluggish post-recessionary wage growth is changing the face of retail development. While job growth and unemployment have improved since the recession, wage growth, which typically is linked with the former, has not rebounded at the same rate. Average wage growth the past two years is 33 percent below the long-term average from 1983 to 2015, according to Daly, Hobijn and Pyle’s March 7, 2016, Economic Letter posted by the Federal Reserve Bank of San Francisco.

The third big picture trend that is impacting retailers is the nearly 130 percent increase in the U.S. personal savings rate since 2007 – 2.5 to 5.8 percent. While few would argue that such an increase in personal savings is a bad thing, when coupled with rises in online sales and slower wage growth, rising employment and population growth have not been enough to support historic per capita retail store expansion rates, particularly in fashion and apparel.

These bigger picture trends have created many ripple effects, including:

  • Struggling department store sales,
  • Limited new fashion and apparel expansions,
  • More value-oriented retailers,
  • Bankruptcies and/or store closings, and
  • Smaller store footprint sizes.

We have shifted paradigms as far as how much brick-and-mortar retail we build and what the new brick-and-mortar shopping experiences consist of. That semi-esoteric big picture explanation sets the stage for the new retail product recently built or in progress in Northern Colorado. This new retail product is heavy on some, or all, of the following:

  • “Eater-tainment” – casual dining, theaters, arenas, art, civic uses and gathering places;
  • Recreation – health clubs, recreation centers, ice skating rinks, etc.;
  • Value-oriented retailers;
  • Daily needs – groceries, drug stores, convenience stores, fast-casual dining; and
  • Alternative nonretail uses – apartments, hotels, churches, libraries, etc.

This sets the stage for some practical examples in Northern Colorado. In July 2012, Alberta Development Partners and Walton Street Capital acquired the 750,000-square-foot Foothills Mall in Fort Collins from General Growth Properties. Soon thereafter, Alberta announced plans for a hybrid mall on site – one part outparcel shops, one part entertainment district and one part enclosed mall.

Consistent with the above-described trends, the outparcel shops (including a well-received junior anchor in Nordstrom Rack) and entertainment district leased relatively quickly and at top-of-market rates. There are 11 new restaurants on site and a Cinemark Cinema. There are 400 new apartments being built on site by McWhinney and there is a youth activity center and ice rink, providing recreation and experience.

Despite a beautiful remodel of what was retained of the enclosed mall, this area has struggled to reach good occupancy. The majority of the local population, somewhat unaware of the consequences of changes in shopping habits, is left dissatisfied about the unfulfilled promise of an upscale fashion apparel shopping experience.

I hear similar sentiments from Longmont residents regarding Village at the Peaks. Residents long for new fashion and apparel options but do not fully appreciate the evolving retail landscape. Often I explain to them what a good job Newmark Merrill did in responding to market demand. There were not enough fashion apparel retailers who were willing to expand in that market to build another fashion mall. Ultimately, over 90 percent of the 480,000-sf center is leased by responding to tenant demand in the form of daily needs, value-oriented users, restaurants and entertainment.

Like Foothills, the centerpiece of Village at the Peaks is a state-of-the-art Regal Cinema – accompanied by several new dining options, such as Bad Daddy’s Burger Bar, Fuzzy’s Taco Shop and Parry’s Pizza. Wyatt’s Wet Goods is a fantastic local liquor superstore with an excellent selection and great prices (or so I’ve heard … wink, wink). Gold’s Gym generates little to no sales tax but generates traffic from people moving in and out of there regularly. There will be co-tenancy benefits with fast-casual restaurants and daily needs retailers such as Whole Foods, which was a coup for Longmont and will generate strong daily traffic once open. And – while not Costco, as many had unrealistically hoped with two other Costco stores nearby – Newmark Merrill secured a value-focused membership club for Longmont by bringing a new Sam’s Club store to the community.

Speaking of Costco, Timnath (population of approximately 2,000 and growing) continues to capture sales from nearby communities and build on its daily needs retail portfolio at Interstate 25 and Harmony Road. Pad sites near Costco and Wal-Mart, developed by Goldberg Properties and Republic Investment Group, have seen good activity due to demand from daily needs retailers and restaurants such as Les Schwab tires, Taco Bell, Starbucks and Freddy’s Frozen Custard, all of which opened in 2016. Chick-fil-A is not far behind with an anticipated opening in 2017.

Eight miles south of Timnath at I-25 and U.S. 34 in Johnstown, a mammoth 250,000-sf Scheels All Sports Store is taking form on land Chrisland Real Estate Cos. sold to Scheels and Carson Development. Expected to be one of the largest retail stores in Colorado and the second-largest sporting goods store in the world, this two-story, 85-foot-tall, part department store, part sporting goods store is well under construction within Johnstown Plaza at 2534. Scheels anticipates opening prior to October 2017 and will bring an entirely new shopping experience to Colorado.

Experience abounds as shoppers approach the entrance and walk past enormous bronze sculpture from renowned Loveland-based artists the Lundeen family. Once inside, customers will walk through a 16,000-gallon saltwater aquarium and gaze upon an 85-foot atrium, complete with a 65-foot-tall working Ferris wheel. Mouthwatering aromas of fudge and lattes from Grandma Ginna’s Café spill into nearby spaces. Golf simulators, basketball hoops and laser-shooting galleries entertain young and old alike. Lest you forget there is a retail store amongst these activities, rest assured, there is something for everyone to buy at Scheels.

The first floor is well merchandised with an excellent selection of fashion and apparel, including “specialty shops” for all types of shoes, casual attire, active wear, seasonal apparel and team sports merchandise. The second level essentially combines a Dick’s Sporting Goods with a Bass Pro Shops for an unmatched selection of sporting goods. It is worth mentioning that Scheels is a privately held, employee-owned company, with some of the highest-paid employees in retail striving to deliver excellent customer service.

Perhaps it takes a store of this magnitude with this type of experience, diversity of product offerings and customer service to get shoppers excited about brick-and-mortar retail. If so, how will the market evolve further if other retailers begin to follow suit?

These are questions for another day. In the meantime, industry and government would be wise to plan on less brick-and-mortar retail per capita, focus on making daily needs retail as convenient and viable as possible, and create more entertaining places with a diverse and complimentary mix of uses.

Featured in November issue of Retail Properties Quarterly. 

Edited by the Colorado Real Estate Journal staff.