Despite what sensational headlines and reports from numerous media sources might suggest, retail is far from dead in Northern Colorado. In fact, the retail market is impressively vibrant. There is certainly some truth to the doom and gloom headlines relative to Northern Colorado, but generally those headlines are more applicable to certain segments of the retail market, such as anchor and junior anchor expansion, than the overall market.
With that said, there have been a number of significant anchor and junior anchor transactions over the past few years with SCHEELS opening their new 250,000 square foot megastore at Johnstown Plaza (which also includes Burlington, Ulta Beauty and Tuesday Morning), within the 2534 development at the southeast corner of I-25 and US Highway 34 just under a year ago, Lucky’s Market under construction on their build-out at the former Sports Authority box at the northwest corner of College Avenue and Mulberry Street in Fort Collins, 24 Hour Fitness recently leasing the former Safeway box just east across College Avenue from Lucky’s, Dick’s Sporting Goods set to open later this month at the Foothills Mall redevelopment in Fort Collins and Ulta Beauty and 2nd & Charles recently leasing space at Front Range Village in Fort Collins. Some of those boxes sat vacant for years, however, and there are still a number of anchor and junior anchor spaces vacant or which will likely come vacant in the Northern Colorado market in the not so distant future.
Absorption of large new, or redeveloped, retail centers has been relatively strong over the past few years with the vast majority of new space being leased, despite a relatively high level of new construction with both the Foothills Mall redevelopment and Johnstown Plaza in lease-up. This has led to a very low retail vacancy rate in Northern Colorado – approximately 3.8% in at the end of Q2, 2018 according to CoStar. That rate declined from approximately 5.0% to start 2015 while Foothills and Johnstown Plaza, as well as many smaller retail developments have been in lease-up. With a vacancy rate well under 5.0%, nearly all of the new space being built absorbing, what appears to be significant demand from smaller tenants and decent demand from larger tenants and continued population and employment growth, “the death of retail” is more of a myth than a reality in Northern Colorado.
Retail is evolving in Northern Colorado, rather than dying. Investors and developers are looking at opportunities for mixed-use centers which include housing, entertainment, hotels and other uses which may function as “anchors” rather than the traditional retail anchors. This is evident with the 405 unit Cycle apartments McWhinney is developing adjacent to Foothills Mall, several apartment communities which exist or which are under construction adjacent to Johnstown Plaza and the Brands at the Ranch project in Loveland which is under construction with plans for a theater, apartments, hotels and an arena in additional to retail and restaurants. I anticipate that as this evolution occurs, there will likely be significant additional demand for regional distribution and warehouse space as retailers continue to “right size” their stores and shift their strategies to attempt to compete more favorably with Amazon.
With a rapidly growing population, which is projected to nearly double by 2035, a very low vacancy rate and decent demand for additional retail and restaurant space, I anticipate that Northern Colorado’s retail market will continue to outperform many other markets throughout the country and “the death of retail” will remain a myth in the region for the foreseeable future. I expect the retail real estate evolution to continue and walk-able, mixed-use, community and neighborhood centers will likely be where much of the future retail is developed in the future.
Author: Jake Hallauer, Chrisland Real Estate Companies