East McCain Is New Frontier ... All Over Again

The Kmart demolition site in North Little Rock's Springhill area may evoke fond memories of Friday night Blue Light Specials for some. But for most people in this crowded retail area, Kmart is a fast-fading image.

Buttressed by the success of McCain Mall, Lakewood Village Shopping Center and The Other Center west of U.S. 67-167, newer niche retailers are jostling for available space east of the highway, replacing dowager businesses that can't compete.

Shopping centers immediately west of coveted Highway 67-167 exit ramps are at near 100 percent occupancy — businesses want to be clustered near the busy malls to capitalize on heavy shopping traffic.

This leaves the east side of the highway as the next frontier.

"We're fast approaching build-out on the west side — not a lot more can happen there," said Robert Voyles, North Little Rock's planning director.

"But there's considerable land as well as opportunities for redevelopment to the east."

Baptist Health Medical Center, the replacement for North Little Rock's aging Baptist Memorial Hospital, forged the way for development when it built on a former horse farm on Springhill Drive in 1998. "The city took the initiative five years ago and rezoned to convert more of that area to commercial," Voyles said.

"We are fairly pro-development here. We've streamlined the process to have reviews done so construction can begin quickly. I think a lot more growth is coming to the [Springhill] area."

Location, location, location is still the mantra of the real estate world. Developers dismiss traffic and infrastructure concerns in favor of high visibility and proximity to huge crowd-attracting malls.

Leading the drive for remaining choice open space east of Highway 67-167 was Lowe's Home Improvement Warehouse, which pushed hard to open on Memorial Day. The company took 14 wooded acres fronting the south side of McCain at Smokey Lane and positioned its $5.3 million, 150,000-SF big box directly in the face of rival Home Depot to the north.

Second Generation Retail

A few open-land-for-sale signs dot the neighborhood around Baptist Memorial and near Lowe's and Home Depot. But the real development story in Springhill is the move toward redevelopment that is creating the second-generation retail boom.

Vacancies created by several store closings have proved fertile ground for redevelopment, and it doesn't matter whether a vacant building is suitable for new tenants as long as it's on a desirable site.

If the building doesn't fit a need, it may be torn down.

"We found it was going to be more economical to take down the Kmart building than to try to work with it," said Scott Schroeder, spokesman for Developers Diversified Realty of Cleveland, owner/manager of the property formerly occupied by Kmart. "We hope to gain more square footage and more flexibility for multiple tenants with new construction."

The 86,479-SF Kmart was the most visible anchor at McCain Plaza for Highway 67-167 travelers. The L-shaped plaza lies just east of the highway on the south side of McCain, with Burlington Coat Factory anchoring the opposite end. Kmart dominated the site for 10 years.

Construction began in early May on Kmart's replacement — a $2 million, 25,000-SF building to be occupied by Bed, Bath & Beyond, the New Jersey-based national chain of domestics merchandise and home furnishings.

Diversified Realty plans to construct two other connecting buildings on the site totaling an additional 50,000 SF. Another retailer, which Schroeder would not name, has claimed 40,000 SF, and the developers are seeking a third tenant.

Bed, Bath & Beyond will be going head-to-head with another national domestics retailer — Linens 'n Things, just up the road in the newly redeveloped Market Plaza Center.

Linens 'n Things emerged last year to fill Market Plaza's western anchor spot formerly occupied by now-defunct Service Merchandise.

Market Plaza developer Howard Wiechern of Danny Thomas Management in Little Rock saw the writing on the wall when Service Merchandise dropped out of his center and, ultimately, out of existence.

To entice an upscale national chain, Wiechern knew he had to put some money into rejuvenating the tired, 22-year-old strip center located on the north side of McCain adjacent to Highway 67-167. "It was," he said, "a major undertaking."

He tore down a 6,000-SF outparcel and replaced it with a 25,000-SF building that now houses Just For Feet. He reconfigured the main building to accommodate a 40,000-SF space for Linens 'n Things, added 2,000 SF on the back of the space next door that is newly leased by Petco and installed $100,000 worth of landscaping features.

In all, Wiechern says he invested $5 million-$6 million, ending up with a renovated total of 200,000 SF.

Shifting Demographics

Market Plaza's redevelopment succeeded in shifting the center's retail mix from smaller, locally owned businesses to national chains desiring larger spaces — a phenomenon not uncommon in older strip malls across the country.

"The changing demographics of an area really drive this kind of redevelopment," said Jeffrey Collins, director of the Center for Business and Economic Research at the University of Arkansas at Fayetteville. "In areas of moderate to higher incomes, when older folks move out and younger families move in, you see the greasy spoons being replaced by gourmet coffee shops and national chains."

Vacant space represents opportunity for developers — a temporary phase in the retail metamorphosis, not a symbol of depressed spending.

"Empty stores are not anything new. It's all part of the coming and going of business," said Jim McKenzie, director of Metroplan, central Arkansas' council of local governments.

In fact, seeking out vacant stores to resurrect is a big part of what Diversified Realty does. It owns 12 former Home Place locations across the country available for redevelopment.

"As new sites and outward growth has slowed over the last several years, we have been looking for opportunities to redevelop," Schroeder said. "This is a means of growth for our company."

HQ: Big Box Orphan

The synergy of clustering and shared services also attracts large chain retailers. Rather than avoiding competitors, they want to be as close together as possible.

Petco, a publicly traded pet supply chain, will be challenging the PetsMart store that has survived the loss of both Kmart and Home Quarters.

"Lowe's in particular likes to be where the competition is," Voyles said. "They know customers will shop and compare and move between stores."

But oversaturation in some segments is possible, as was the case for Home Quarters. Competition eventually drove the entire national chain out of business. The hulking 104,000-SF HQ building in North Little Rock has been vacant since the store closed in 1999. It sits on 11 acres at 3500 Landers Road, just south of the new Bed, Bath & Beyond site. A 2.5-acre pad adjacent to the building is for sale.

The North Little Rock HQ was marketed as a package deal with its sister store on Chenal Parkway in west Little Rock — a possible factor stalling both stores' redevelopment. The Ashley Co. of North Little Rock finally bought the two stores for $10 million in April.

Ashley Co. wasted no time in finding a tenant for the west Little Rock location. Garden Ridge, a national home décor and craft chain that takes up the entire 104,000 SF, had its grand opening sale last week. It's the company's first venture in Arkansas.

And there are rumblings that several prospective tenants have shown interest in the North Little Rock store.

"We're talking to a couple of possible tenants right now," said Rick Ashley. "I can't say who they are or whether it will pan out or not."

Ashley is confident a tenant will surface soon. If one company doesn't want it, another one will.

"When you see cycles like this where a building goes dark, it's not necessarily a reflection of the area's economy. There will always be turnover in tenants."