700,000 SF of Retail Under Development

LAS VEGAS-Montecito Cos. has 700,000 sf of new grocery-anchored retail centers under construction or about to break ground in the region. The total would be higher if the locally headquartered specialist in land investment and retail development hadn’t recently completed and leased up the first phase of Tenaya Village Center, a $20-million, 100,000-sf development at the northwest corner of Tenaya Way and Azure Drive in the Centennial Hills master-planned development.

Montecito SVP and development director Nick Hannon tells GlobeSt.com that the company accumulated most of its development land more than a year ago, which means it hasn’t been affected as much by the run-up in land prices over the past 12 months, only the run-up in construction prices. Currently, thanks in part to single-digit vacancy rates across the region, triple-net lease rates at his properties typically end up between $2 and $3. Hannan says those who are starting to develop retail on land acquired more recently will need to achieve rents above $3 per sf to cover their increased costs.”I think we will see a 20% to 30% increase in rental rates over the next 24 months, which exactly mirrors the same increase we’ve all had on land and construction costs,” he says. “So if the average is $2.50, it will be at $3.25.”The furthest along of Montecito’s projects now under construction is Montecito Marketplace, a 215,000 sf multiphase community center that is 90% percent preleased. The center is located on 19.2 acres at the southeast corner of Durango Drive and Elkhorn Road. Tenants include T.J. Maxx, FedEx Kinko’s and Starbucks. Phase I includes 111,000 sf of retail space anchored by a 65,000-sf Smith’s Food & Drug. The $48-million first phase is complete, and stores are starting to open.

The largest is Montecito Highlands, a 250,000-sf retail shopping center that will be situated on the northwest corner of Horse Drive and US 95. The center will include grocery-anchor, junior anchor, home improvement, retail, office and restaurant pads. Montecito Highlands is scheduled to break ground in the fourth quarter of 2006. Anchor leasing is now under way.