Tag Archives: Dave Cheatham

Velocity Retail, WEB

Velocity Retail Group reports recent transactions

Below is a summary of Velocity Retail Group, LLC recently completed transactions:

Goodwill Industries will be opening a new retail store at the southwest corner of Arizona Avenue and Riggs Road in Candler, Ariz.  Andy Kroot of Velocity Retail Group negotiated the ten-year lease of 27,600 SF on behalf of the tenant. The landlord, Greenway 32, LLC, was represented by Bob Rusing of Arizona Partners Retail.

Velocity Retail Group represented Tokyo Joe’s in a ten-year lease of 2,500 SFnorth of the northeast corner of Baseline Road and Val Vista Drive in Gilbert, Ariz. The landlord was represented by Trent Rustan of Commercial Properties.  A second Tokyo Joe’s was also signed at Chandler Pavilions at the southeast corner of Ray Road and Interstate 10 in Chandler.  The 2500 SF store will be opening in the former Barbeques Galore space during the 3rd quarter.  The landlord was represented by Cliff Johnston of Cassidy Turley BRE.

Integrity Staffing leased a 6,005 SF free-standing building at the Agua Fria Towne Center, located at the northeast corner of Camelback Road and Loop 101 in Glendale, AZ. Velocity Retail Group’s Judi Butterworth, Nick Ault, and Michael Clark represented the landlord. The tenant was represented by Michael Prochelo of Financial Management Group.

Nick Ault of Velocity Retail Group represented Yummi Sushi in a three-year lease of 3,797 SF at the northeast corner of Thunderbird Road and 32nd Street in Phoenix.  The landlord was represented by Reuel Couch of The Restaurant Brokers.

Representing the landlord at the Sun Village Fair Shopping Center at the NEC of Warner Road and Alma School Road in Chandler, Ariz., Michael Clark, John Jackson, and Larry Miller of Velocity Retail Group leased a 1,507 SF space to Third Party MVS Services on a five year lease. Sun Village Fair is one of eleven valley centers that Velocity Retail Group represents for owner NorthStar Realty Finance Corp.

Denny’s Restaurants was represented by Andy Kroot of Velocity Retail in the 10-year least of 5,695 SF at the NWC of I-17 and Dunlap Avenue, in Phoenix. The Winco/Conn’s Shopping Center was represented by Gordon Keig of Kornwasser Properties.

Larry Miller and John Jackson of Velocity Retail represented Edward Jones Investments in the five year lease of 1,100 SF at Lindsay Groves on the SWC of Lindsay Road and Germann Road in Gilbert, Ariz. The landlord was represented by Matt Zaccardi of CPI. Edward Jones Investments plans to relocate their Gilbert office to the new location in October of this year.

Miller and Jackson also represented The Sherwin Williams Company in the ten year lease of 4,000 square feet West of the Southwest corner of Happy Valley Road and 19th Avenue in Phoenix, AZ. The landlord, Happy Valley Towne Court, was represented by Jerry Roberts of NNN Amercia. The lease represents the first of several stores Sherwin Williams plans to open in 2015, as they expand their North Phoenix footprint.

Westfest LLC, owners of Desert Sky Festival located at the southeast corner of Thomas Road and 75th Avenue recently completed a 3-year lease with CFC financial for a 1200 square foot space.  Judi Butterworth from Velocity Retail, and Paul Serafin of De Rito Partners co-listed the project and negotiated on behalf of the Landlord.

Darren Pitts of Velocity represented Uptown Cheapskate in a five-year lease of 4056 square feet at Chandler Gateway shopping center located at the northeast corner of Chandler Boulevard and Chandler Village Parkway.  The landlord is Chandler Gateway SPE, LLC.  The retailer is a sister company of Kid to Kid, and will focus on teen and tween resale and new clothing and accessories.  The store is planning to open by 3rd quarter of this year.

PowerPoint Presentation

Phoenix retail is poised for progress

The Phoenix commercial retail market continues to improve in vacancy and increased leasing activity.  Vacancy rates, once hovering near 14% have now dropped to 10.6% through the 2nd quarter of 2014.  Leasing activity of 2.6 million square feet in 2013 was the strongest recorded since before the Great Recession six years ago.  Additionally, in the first two quarters of 2014 the market has recorded absorption of 750,000 square feet.  These three factors combined position the market to continue to improve through the balance of 2014.

Of the six regional areas, all but two are in single-digit vacancy as of the 2nd quarter.  The Central and Southeast regions continue to be hit with higher big box vacancies that drive the vacancy higher in these regions.  Overall in Phoenix big boxes total 38% of our total vacant space.  However, in the Central region big boxes account for 46% of the vacancy, and in the Southeast region it is 42%.   With 261 vacant big boxes in Phoenix, this component of the retail market continues to be a cause for concern.

A bright spot on the horizon is that retailers and restaurants are active with national and regional concepts announcing their arrival in the market.  Activity for shop space is increasing and rental rates for premium buildings are holding strong.  Retailers who have remained relatively dormant during the last five or six years are cautiously starting up their expansion plans once more.

With little to no new construction on the horizon we are accelerating the rate that vacancy declines, and even with continued steady absorption, we are projecting that the entire market will be in single-digit vacancy with every regional area recovering to near pre-recession vacancy levels.  Phoenix is poised for continued progress in 2014.

X Team booth, courtesy of Velocity Retail

ICSC RECon 2014: Retail poised for expansion

The 2014 ICSC event in Las Vegas has successfully wrapped up, and initial reports are that the retail industry is poised for continued expansion. The attendance was up from last year with the attendee count reaching close to 40,000. Having experienced the last 5 years of our annual convention during the economic downturn, this year was a welcome change. It was encouraging to see people spending their time talking about what is going on for the future and reviewing new sites. Discussing business. Not the past.

The ominous cloud that has darkened many markets for the past five years has appeared to have lifted. Looking around the convention hall there were site plans on every table, conversations were about new deals as retailers and developers are preparing for a measured expansion in the coming years.

Velocity Retail Group a member of X Team International, a network of experienced retail partners throughout North America. With over 35 offices and 400 professionals we are able to understand the market from a global perspective. Some states such as Texas, California and Florida have strong growth and are back to their pre-recession activity level. This is contrasted by a few other markets that are still feeling the economic effects of recent years.

In the Phoenix market we still have a ways to go, but we are finally rebounding with several economic indicators pointing toward positive growth. Forbes magazine projected Arizona to have the fastest job growth at 3% annually over the next five years, and Moody’s Analytics forecasted Arizona to expand to a U.S. best of 4.6% annual economic growth. A myriad of retailers and restaurants are opening their first stores in the Phoenix area with several more exploring future expansion plans.
The retail market is frozen no more. Phoenix vacancy rates continue to improve, and should finally break back into the single-digits by the beginning of 2015. In fact at that time, most of the retail submarkets in Phoenix except for the Central and Southeast Valley will be considered to be in a healthy position. The big-box sector, with 265 vacant big boxes will continue to be a source of concern. Our company has invested in new technologies, resources, and personnel. We are prepared for the next wave, and are expecting a big one.

Shea Scottsdale Safeway

Safeway sale creates looming cloud over Phoenix retail real estate market

Over the past two years, the Phoenix retail real estate market continues to improve with lowered

vacancy rates and strong absorption. The one area that persists as a cause for concern is the number of vacant big boxes in the market. With the recent announcement of the impending sale of Safeway to one or more of their competitors, this is news that could create further hardship in the Arizona shopping center industry; here is why.

Overall Phoenix retail market 4Q 2013.

Overall Phoenix retail market 4Q 2013.

 

Currently, there are 308 vacant big boxes in the Phoenix metropolitan area. Over 56% of these boxes are in neighborhood shopping centers.

 

This amounts to a total of 175 vacant boxes in neighborhood centers. Never before in the history of the Phoenix area have we ever come close to having this amount of vacancies in our neighborhood shopping centers.

 

When a grocery store becomes vacant in a neighborhood center this obviously creates a harmful effect on the small shop tenants in the shopping center who depend on the traffic driven by the grocery store. A grocery anchored center does not have the same pulling power to draw customers that a power center or regional mall does. Neighborhood centers typically only reach shoppers in a one to three mile radius. These smaller trade areas are the hardest to replace from a re-tenanting perspective if there is not another grocery store that can fill the void.

Vacant big boxes by type of center.

Vacant big boxes by type of center.

 

 

With the continued transformation of the grocery industry shifting to regional trade areas and to larger and larger formats often over 100,000 square feet, retailers such as WinCo, Super Wal-Mart and Fry’s Marketplace are not viable candidates for these neighborhood centers. Additionally, many times a grocery store has a restriction against another grocery store going into the same space, limiting the already small pool of potential replacement tenants even further. These types of vacancies also have a very negative effect on the value of this type of shopping center. Many of them have lost 70% to 80% of their value because of a vacant anchor.

 

When Basha’s filed for bankruptcy in 2009 they left 25 vacant grocery stores in their wake. Today, five years later 13 stores — over half —are still vacant. If Safeway is sold to someone who is currently in our grocery market, I fear that there will be a rash of store closings which will further exacerbate our big box problem – just as we are starting to gain some ground.

 

Neighborhood shopping centers have been a mainstay for investors as power centers have lost some of their appeal in recent years. Neighborhood centers were considered a safer investment as they had not been affected by the downsizing and consolidations among the power center users (electronic stores and office supply, are examples). Many REITs are looking for a safer product type for their investors and neighborhood centers fit their criteria nicely. A merger of this type will cause the investors to step back and evaluate their options even further.

 

In the event of a Safeway-Albertson’s merger this could be one of the better outcomes for Arizona, as Albertson’s would have an opportunity to increase their footprint and market share in Phoenix. In this event, don’t be surprised if there is a large block of stores that hit the marketplace, which will impact our improving yet still fragile retail market.

 

The grocery business in Arizona is very diverse and like all retail, will continue to evolve. There is no doubt that we will have some interesting times on the horizon. Let’s hope that this merger creates a cloud that has a silver lining, and that however this merger shakes out that the stores are able to continue to operate and not add to our big box surplus.

Popeyes, Velocity, WEB

Velocity Retail Group Negotiates First Redesigned Popeye’s for Phoenix

Velocity Retail Group, LLC announces that the first newly redesigned prototype for Popeye’s Louisiana Kitchen will be built at the southwest corner of Elliot Road and Priest Drive in Tempe, Ariz. President Dave Cheatham,  Vice President Michael Clark and Associate Nick Ault of Velocity Retail Group represented Popeye’s in the transaction. The landlord TPP JV Maricopa, LLC an entity controlled by Trigate Capital was represented by Clift Johnston of Cassidy Turley BRE.

 

“The site is the first of many that this new Phoenix franchisee is planning for the Arizona market. While we have existing Popeye’s stores in our market, the Louisiana Kitchen concept it new to the chain and our market,” said Cheatham.

 

“Arizona is a key expansion market for our franchise company, by working with Velocity Retail we are able to maximize their experience and relationships in the market to execute our expansion plan,” said Amin Dhanini, President of HZ Props AZ, LLC the entity which will control the Arizona stores.

 

Popeye’s Louisiana Kitchen, Inc. is the world’s second-largest quick-service restaurant chicken concept with 2,225 stores as of the end of last year. Popeye’s distinguishes itself with a unique “New Orleans” style menu that features spicy chicken, chicken tenders, fried shrimp and other seafood, as well as jambalaya, red beans and rice and other regional items. Popeye’s is a highly differentiated brand with a passion for its Louisiana heritage and flavorful authentic food.

 

The new building will be 2,951 SF and be located on a 23KSF parcel fronting Elliot Road. It is expected to open by the 4Q of this year. “We are pleased to be able to represent Popeye’s as they roll-out this new concept to the Arizona market. Our goal is to strategically locate A+ sites and get their stores up and running as fast as possible,” said Clark.

metrocenter, WEB

The Magic’s in the Makeup: The Shopping Centers of the Past Are the Future

From fresh paint to new market positions, shopping centers are pumping in deferred dollars to greet the returning retail dollars.

“When things stay the same, that’s scary,” says Stan Sanchez, president and partner of De Rito Partners, about the shift in the Arizona shopping center marketplace. “There’s no doubt that location, location, location is still most important for retail site selection. The difference is that the market for the location is shifting.”

Sanchez and his company recognized the shift in the markets surrounding properties they own and manage, and post-recession activity is freshening those properties.

“There’s two parts to all the activity going on,” says Dave Cheatham, president of Velocity Retail Group. “It’s not a wave of renovation; it’s a combination of catching up with deferred maintenance and updating properties for the market.”

Gordon Keig, senior vice president at Kornwasser Shopping Center Properties, LLC, agrees, but with a slightly different take.

“Building in a growth area ties up your money for as much as three years,” he says. “Finding a good value in an older property and turning it around is a lot more appealing because you are working with a current cash flow.”

Although the proverbial “location, location, location” is still good, the property’s market has changed. Demographics shifted in Arizona markets from the time many shopping centers were built. Throughout 2013, the media bemoaned the plight of aging shopping centers or predicted the scraping and redevelopment of obsolete retail corners.

“I don’t see that happening,” says Cheatham. “In the Phoenix and Tucson markets, we have challenges with empty big boxes, and those are being adapted to alternative uses. Shopping centers, even distressed centers, are changing to match the market.”

Kornwasser bought the  Southgate Mall late in 2012 and has plans to tear down the main building in the 346,000 SF mall then rebuild it with smaller, contemporary outward-facing stores.

“There is shrinking demand for retail space,” he says. “Even with the reduced square footage, we’ll have a more functional, efficient and valuable property.”
At the other end of the spectrum are looks.

“Lipstick,” chuckles Sanchez, “Some properties just need a little lipstick – painting, landscaping and a facelift.”

From De Rito’s platform, Sanchez is involved with upgrading its properties, overseeing enhancements of properties managed and in some cases, running the redevelopment efforts.

“It was more than lipstick for Pavilions (Loop 101, Indian Bend and Pima roads in Scottsdale),” he says. “It was a large-scale redevelopment of the property.”
Countering the downsizing trend, De Rito Partners took the center from 900,000 SF to 1.4 MSF.

“Redevelopment in this market requires innovation and creativity. We changed paving, landscaping and facades,” Sanchez lists the upgrades to the Valley’s original power center. “We’ve got a modern look and changed the property to fit the changing market.”

This may be the most important mantra for retail property owners for the second half of the decade: changing the property to fit the changing market. Keig, Sanchez and Cheatham all spoke of how the market has shifted in the past 10 years.

“We have an interesting situation in the market,” says Cheatham. Velocity is one of the largest retail brokerages in the state in terms of square footage represented. “We have more big box vacancies than anywhere else in the nation, and we’re the best place in the country for small-space leasing activity.”

Small store leasing is going to be very healthy in 2014, he says. Rental rates are still very competitive for lessees, but there are going to be fewer new retail spaces developing. Sanchez sees single-digit retail vacancy rates in 2014. For Keig, the investment is in already-developed neighborhoods.

“In-fill is finally beginning to happen,” he points out. “We’ve heard of it for years, but with financing challenges today, it’s easier to back a project where there is some existing cash flow from current tenants. The project moves faster.”

It’s not just the small shopping centers undergoing facelifts and cosmetic surgery. “We’re going to be re-shaping (Scottsdale Fashion Square)” reports Steve Helm, assistant vice present, property management for Macerich and manager of the 1.9 MSF tri-level Fashion Square. Once city approvals are locked down, Macerich plans construction of a nearly 100,000 SF addition that replaces the current, aging Harkins theaterplex on the lower level by raising a new 12-screen complex to the second level. About 50,000 SF of retail space will be opened up under the new theater.

“Redevelopment is exciting and rewarding,” concludes Keig. “It’s an opportunity to invest in neighborhoods, and the neighbors return the favor when you do it well.”

Velocity Retail Group

Velocity Retail Group Reports First Retail Absorption Since Recession

Phoenix Metropolitan retail recorded positive net absorption for the third straight quarter as recorded in statistics just released by Velocity Retail Group through June 30, 2012.  This is the first positive absorption recorded since before the “Great Recession” in November of 2008. After 12 consecutive quarters of negative absorption, the last three quarters of positive absorption signal a healing that has begun and shows that we are well on our way to a solid recovery.

Dave Cheatham, managing principal of Velocity Retail Group commented on this positive trend, saying, “Since late 2011 we have been seeing an up-tick in retailer activity.  National tenants are exploring their expansion opportunities, value oriented retailers have been taking advantage of the big box spaces that have been vacant, and local and regional tenants are opening new stores.

“Landlords are figuring out how to structure deals with quality tenants, and fill those empty spaces,” said Cheatham. “Whether it’s a combination of free rent, additional build-out monies, or favorable rent structures for the first few years, they’re getting it done.”

Michael Clark, vice president at Velocity, states, “There is over 1.2 million square feet of net absorption through the second quarter of 2012.  The Phoenix retail market has not seen annual positive absorption since 2008. The overall vacancy rate for Metropolitan Phoenix has been showing consistent improvement in the past year with a recorded decline of over one percentage point in the past year.  This is extremely good news.”

Velocity Retail reports second quarter of 2012 ended with a vacancy rate of 12.2%.  Just one year ago, in the second quarter of 2011, the vacancy rate was 13.4% which is an improvement of 1.2% in this twelve month period.

Velocity Retail Group sees a favorable outlook for the Commercial Retail market for 2012.  With improved tenant activity from national and local retailers, and some of the obsolete retail spaces being absorbed by non-retail uses (such as schools, medical facilities or call centers), the vacancy rate should continue improve and by mid-2013 be between 9.9% and 10.5%.

For more information on Velocity Retail Group, visit their website at www.velocityretail.com.