Retail Leasing Gets Creative as a Workaround to COVID

BUDA, TX—Shops on Main, a neighborhood center located at Main Street and Cabelas Drive in this suburban Austin community, was completed in early 2020. At that time, the Austin market was reporting near-record occupancy of 96%, placing it as the state’s tightest major retail market.

Shortly thereafter, COVID entered the picture and that retail picture was largely turned upside down. However, despite the issues facing retail due to the pandemic, the Weitzman team of Cameron Longmire and Gabe Sanchez leased all of the roughly 20,000-square-foot center and a lease is in the works for one remaining 2,566-square-foot space. The leasing team surmises that the strength of surrounding retail has provided leasing momentum. Shops on Main is located at a quadrant that includes Cabela’s, Walmart and H-E-B.

To date, the leasing team has inked leases for Texas State Optical (2,564 square feet), Dr. Otto Pediatric Dentist (2,532 square feet), Marble Slab Creamery-Great American Cookie (2,000 square feet), ATI Physical Therapy (2,000 square feet), Marco’s Pizza (1,406 square feet) and Club Pilates (1,698 square feet). Shops on Main also features Bahama Bucks, Shipley’s Do-Nuts and a nail salon.

Sanchez notes the center offers two drive-thru lanes that were added for Bahama Bucks and Shipley’s.

Moreover, Longmire noted that one of the advantages of the center, which incorporates three separate buildings, is in fact its multiple-building configuration. For example, Marble Slab’s franchisee requested an endcap, which has been the case of the other food concepts in the project. He says the leasing plan has been successful because of the complementary tenant mix.

“ATI signed after Texas State Optical and the pediatric dentist,” Longmire tells GlobeSt.com. “They certainly like being next to other medical tenants. Additionally, the landlord put in the in-ground grease traps when he developed the property so that was an added bonus to the restaurant tenants. The great parking and excellent visibility were key when ultimately getting these tenants to engage and sign.”

Longmire noted that leasing has proceeded at a strong pace despite the pandemic because the tenants saw the value of the location.

“Some deals took a bit longer but the leasing continued to move forward,” he said.

Due largely to closures from national retailers such as Pier 1, Tuesday Morning and 24 Hour Fitness, Austin reported a one-half percent drop in mid-year occupancy. One big plus is that Austin’s annual construction hasn’t reached the 1-million-square-foot threshold since 2016, which is extremely conservative for a market where retail is essentially full, according to a recent Weitzman report.

For 2020, Weitzman projects that Austin is on track to add approximately 404,000 square feet in new and expanded retail projects. The most notable space is for a new 30,000-square-foot Whole Foods, a 26,000-square-foot small-format Target store in East Austin and a new South Austin H-E-B grocery store with approximately 130,000 square feet.

This lack of new space drives demand to existing retail, which is why the market continues to record fairly steady leasing activity, given the severity of the pandemic. The decline is also being kept in check by assistance for retailers from various sources.

As an example, restaurants have benefited from initiatives such as digital marketing, curbside, takeout, delivery and meal kits. Also for the first time, the state is allowing restaurants to offer alcohol to go.