The New Power Center

The next 24 months are key for retail, says Arch-Con SVP Marc MacConnell. (We snapped him with his old A&M buddy CDA’s Ray Duerer at Bisnow's Retail Summit Friday.) He’s seen about seven site plans in the last few months that he’d call power centers (so they’re coming back to Houston soon), but they’re different now. Instead of being anchored by soft goods retailers like Kohl’s, they’re anchored by grocers. And notably, they’re averaging about 150k SF, about half of the typical power center in the last cycle.

IA Management VP Teri Young (who was basking in our weather—she flew in from Chicago, where it was 17 degrees) says power centers will be all about the experience going forward. Besides being the most active segment now, grocers really make sense in that because they create a daily trip. Then you just need to keep shoppers there longer by adding entertainment and kid-friendly offerings. Pictured, Teri’s with fellow panelist Triad Retail Construction VP Kevin Murphy.

Houston has been third in the nation for retail demand growth since 2009, says Retail Solutions founder David Simmonds. He says we’ve always kept up development with demand, so it’s been interesting for tenants to be in a world where that’s not true—they’re not used to being so powerless. It’s such a dog fight out there, he says, a quality tenant can be willing to pay full asking rent and still get beat out.

Here’s our moderator, BURY principal Steve Eklund with Seeberger Associates’ Perry Seeberger. Steve says development timelines have been brutal—on day one in his office, he’s already a month behind. Availability of labor is a huge problem, and construction costs are up about 7% again this year, and projected to do the same in 2015.