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Firms take advantage of space glut

Sweetheart deals lowering retail lease rates

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Firms take advantage of space glut

Outlet stores are now being sought to fill the vacant space at the lifestyle center anchored by Bass Pro Shops and JC Penney.

HIME ROMERO/The Bulletin

POSTED February 8, 2009 5:10 a.m.
The lull in the economy is giving established Manteca retail and professional concerns the opportunity to move into prime locations.

Firms such as PMZ Real Estate, Coldwell Banker Crossroads, Zeiter Eye, and Western Family Dental are moving to brand new quarters built by commercial and business park developers who either had projects underway as the economy started slowing or else are taking advantage of softer construction costs to move forward now to position themselves for the coming upturn. Expanding inventory and the slow economy has prompted the developers of various new retail centers and business parks to offer deals too good to pass up.

PMZ Real Estate is moving into the high profile corner location in the Meridan Business Park at Winters Drive and West Yosemite Avenue near Kaiser Hospital. Zeiter Eye is relocating to the same business park. Coldwell Banker Crossroads is moving into the prime street-side location in the new North Main Street Plaza on the northwest corner of North Street and North Main Street. Western Family Dental is locating in the new retail complex on the southwest corner of Commerce Drive and East Yosemite Avenue at Spreckels Park where T-Mobile is also moving.

Leasing agents have indicated they expect other well-established businesses to move as well as Manteca will have over 2.8 million square feet of retail space once all projects that have broken ground are finished by the end of 2009. The city had 2.2 million square feet with a 5.9 percent vacancy in the fourth quarter of 2007. The vacancy rate is now estimated to be as high as it was in the second quarter of 2007 when there was a record high 12.6 percent vacancy rate. The vacancy rate doesn’t reflect business parks that can under various circumstances be used for commercial and office uses.

The glut – at least by Manteca standards of prime locations – is forcing landlords of older retail and business park complexes to refrain from raising rents or else negotiating lower terms when new leases are negotiated.

The biggest vacant retail building in Manteca is the Mervyn’s store on South Main Street that has around 50,000 square feet.  Big Boy Market, vacant since mid-2008, will soon be reopening as a Grocery Outlet. By mid-March one of Manteca’s newest “small boxes” – Circuit City – in the Stadium Retail Center will be vacant. The decision by Poag & McEwen to team up with Craig Realty Group to convert the center anchored by Bass Pro Shops and JC Penney into the Lifestyle Outlets at Manteca will make it easier for Stadium Retail Center to find a replacement tenant for Circuit City. Most small box national retailers shy away from outlet malls.

The morphing of The Promenade Shops at Orchard Valley into Lifestyle Outlets at Manteca could prove problematic for the Tracy Outlet Mall as tenants there may prefer a more high profile location that the Highway 120 Bypass offers.

The switch to an outlet mall may indeed be “a match made in heaven” as Josh Poag and Steven Craig, but it is also a sign of the times. Retail marketing strategies are shifting at the same time stores are closing.
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