Tight Squeeze in Columbia Retail Market

By Mark R. Smith



Businesses seeking office or industrial space in Columbia, fear not: Ample opportunities are available.

But those calling for retail space need to step outside of the box and get deep into creative thought before they can move.

While it's a market that most retailers and restaurateurs want into, given Columbia desirable demographics, they also often find the village centers passé. Rents at The Mall in Columbia and Dobbin Center are too expensive for many smaller concerns, and space in the big box centers like Snowden Square, Columbia Crossing and the new Gateway Overlook is also pricey and normally the domain of large national players.

So, where is a small retailer to look in Columbia these days? In some cases, rezoned, redeveloped space has presented an affordable option.

Take the McGaw Plaza restaurant park. Located across Stanford Boulevard from Apple Ford near Snowden River Parkway, the center is now home to such tenants as The Greene Turtle, the Atlanta Bread Co. and Cheeburger Cheeburger, as well as The Johns Hopkins University APL Credit Union — on a site that had been home to Performance Pontiac GMC.



Old Zoning, New Tricks

It's true that today's tenants that want to grow into better locations don't have many options.

"The moms 'n pops don't go to the dead village centers, the mall or to sit in front of Target at a big box center," said Owen Rouse, senior vice president and principal with Manekin LLC in Columbia, which built McGaw Plaza and sees the trend as a positive. "They go to converted industrial or flex buildings where they have shelter and power. Just drive down Red Branch Road and see."

Another effect of the tight market has been the sharply rising rents of recent years. "It happened virtually overnight, in a 24- to 36-month span," Rouse said, "and $17 per square foot suddenly became $40."

That's what has surprised Rouse the most. "The thought that this sleepy little market is now home to 'big boy' real estate is somewhat remarkable," he said. "It's sort of a wake-up call to a lot of people that we are not in Kansas anymore.

"But now, let's go backwards," he said. "If I have a tenant who can pay me $35 to $45 a foot who can't find a suitable space, maybe I can tear down a building" — which was the case with McGaw Plaza. "That space would have gone for about $25 per foot a few years ago."

Rouse said some of those tenants contemplated Gateway Overlook, "saw that the rents could reach $60 per square foot in some cases, then came back to McGaw Plaza."

Three key issues have arisen in today's market, he said: high rents; retail being demolished to build more retail (like McGaw Plaza); and industrial buildings being recycled prior to the normal end of their useful life due to market demand (which would happen if Wegmans builds a new store at a current warehouse site across McGaw Court from Apple Ford).

Forty years ago, there was no 20,000-square-foot space to accommodate Barnes & Noble or Bed, Bath & Beyond. "For books and housewares, you went to the mall, where there were five department stores and a few specialty shops to buy all of that stuff."



Straddling the Fence

If the mall wasn't the place to buy all that stuff, the village centers probably were. But when the big box boom hit, it pushed the folks at The Rouse Co. into an odd space, said Peter Framson, principal with Green Light Retail Real Estate Services in Bethesda.

"Rouse was trying to boost the village centers along (which are now owned by Kimco Realty Corp. of New Hyde Park, N.Y.) while the retail landscape was changing," Framson said. "They were building the big box centers at the expense of their own village centers, as much as they tried to protect them."

Calling the village centers "labor intensive projects," Framson said what will happen to them is "hard to say. Perhaps service companies will be the right businesses for the village centers. That approach has been successful at Piney Orchard Marketplace in Odenton, for example. Then the occasional retail guy will fit in."

He also said that the regional and national restaurants will continue to open in Columbia "if they can find new places to locate. Whether we see more retail projects like McGaw Plaza is a function of the zoning powers that be."

Patrick Miller, senior principal with KLNB Retail in Towson, thinks the trend to build on infill locations will continue. He noted another new center a little further down Snowden River Parkway at Minstrel Way, which will include Chevy Chase Bank, fast food and sit-down restaurants, as well as two hotels (to be determined).

"The other retail phenomenon is mixed-use," Miller said. "That's where the developers are driving it now" at Maple Lawn and along the Route 1 corridor due to Howard County's revitalization plan at Elkridge Crossing, for instance.

"It was just a couple of years ago that developers were tearing everything single-story down to build multi-family or other residential," Framson said. "Now there is more interest from retailers than space to accommodate them. That's what makes this Corridor market so amazing — and the party is definitely not over yet."



At the Mall

Rouse noted the reluctance of smaller operators to pay the higher rents at The Mall in Columbia, but Karen Geary, senior general manager of the General Growth Properties-owned center, said that "22% of current tenants are locally owned," including Edward Arthur Jewelers, Bun Penny, Kokopelli and Silver Heron.

Whether smaller tenants opt to pay the mall rent depends on their volume, as well as price point, customer base and marketing plan, Geary said.

"I've spoken to various brokers and gotten different responses," she said, noting that the mall is 99% leased. "I always get very concerned when brokers say they don't want to bring their clients here due to the cost because it really is affordable."

Saying that her office does not discuss leasing rates, Geary did say that it does "work very closely with our merchants" and noted GGP's Retailer Productivity department, which "seeks out entrepreneurs and that next wave of hot retail."



It's All Good

Rouse wears similar specs when he tools around Columbia, keeping an eye out for "oddball uses" of land at retail corners.

These new uses "aren't born, they're made," he said, "and the market dictates what the use will be. Then you have to work within the confines of zoning and the vagaries of the site."

Rouse thinks that Columbia may even see the reinvention of the village centers that The Rouse Co. felt held such promise, because "tenants who are dying to get into this market are paying whatever it takes to do so."

Is that a bad thing? Not at all. "Retailers pay higher property taxes to the county than industrial users and their customers pay sales tax to the state," he said. "Also, 100,000 square feet of retail space employs many more people than 100,000 of industrial, and retail generates employment for all kinds of trades."

That said, of course, it's all about the dollar. "Retailers are capitalists. If they smell a dollar, they'll go to a certain site," Rouse said, "and if they don't, they'll leave."