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Monday, Nov. 02, 2009

Recruits, prospects and letters of intent

THE STATE OF RETAIL IN LEXINGTON | Part 2 of 3

Shoppers haven't needed to look far during the recession to see its impact around Lexington — that is, if they're even out shopping.

Circuit City's bankruptcy left a hole in Hamburg and along Nicholasville Road.

So, too, did the bankruptcy and closing of Linens 'n Things.

Goody's. Dawahares. S&K Menswear. The list goes on.

But as signs mount that the economic hardships might be abating, so, too, have come the signs that retail might be recovering.

Property developers at Hamburg expect to announce in the coming days that a national retailer will take about half of the Circuit City space.

And Fayette Mall has quickly filled its vacant spots. Farther down Nicholasville Road, Brannon Crossing has signed more than a dozen small tenants in the last three months. The center discounted some rents, a method used by many shopping center owners during the recession.

Meanwhile, others have sought out different sorts of tenants, relying less on strictly retail.

"Activity has increased over the course of the year," said Al Isaac, president of NAI Isaac, a commercial real estate service. "It's not anywhere we would want it to be, but we see more activity every month."

The damage

Among the hardest hit shopping centers was Hamburg, which saw some national retailers — Circuit City, Linens 'n Things and Sportsman's Warehouse — vacated large spaces.

"That's not anything we would have ever expected," said Nancy Sebring of the Hamburg development office that handles the portion containing Sportsman's Warehouse and Circuit City.

To help fill the space vacated by Circuit City, the property managers opted to split the 33,000 square feet of space. A national retailer has signed a letter of intent on the 15,000 square feet section, but all details aren't yet finalized, Sebring said.

Sebring said it's possible the former Sportsman's Warehouse will also be divided. There is a plan to build space for more small tenants in a plaza to the left of the former outdoors store, so "there's room to grow if someone needed something special," she said.

On the other side of Hamburg, the Linens 'n Things space has attracted three national chains, but "it's still too preliminary to identify any of the prospects simply because we don't have a signed lease," said Dave Miniutti, senior vice president for retail leasing at Thomas Enterprises, which manages that portion.

Farther down Interstate 75, Richmond Centre has begun to fill some of its vacancies with restaurants like Panera Bread and Buffalo Wild Wings.

"People have begun to realize the potential of the Richmond market, and now it's starting to snowball," said Charles Thrift, senior leasing associate.

The development still has a hole at its former Dawahares, as well as 15,000 square feet for what could be between four and eight smaller shops. And Home Depot, which was expected to be an anchor, has not submitted a plan to Crosland for the property it owns.

Like other major retailers, Home Depot has scaled back on expansions during the recession.

Major chains are "probably going to look for more of a real bottom" to the economy before again expanding, said Tom Lewis, a lecturer in the management department at the University of Kentucky's Gatton College of Business & Economics.

Lexington's pluses

The best performer of Lexington's retail undoubtedly has been Fayette Mall, which has no vacancies.

"Fayette Mall was lucky in that their anchor tenants and quite a few of the specialty stores weren't the ones that have had to file bankruptcy yet," Lewis said.

Among those that did, though, was S&K Menswear. After it closed all its stores, the mall quickly replaced it with Urban Nation.

"There's a whole lot to be said in our industry for being 100 percent occupied even at a time like this," said general manager Myron Worley.

And while some may be cutting rent to keep plazas occupied, "when you're at a shopping center that's fully leased and you have lots of interest from others ... that's not something that comes up very often," Worley said. He declined to speak in more detail.