The proposed 2.4-million-square-foot Copper Ridge project won the City Council’s support amid one of the worst retail environments in Colorado Springs in more than a decade.
Vacancies at local shopping centers are at a 10-year high, rents are down and economists suggest the days of heavy consumer spending are behind us — forever.
Perhaps more troubling, Colorado Springs has more retail businesses per capita than the average U.S. city.
In light of those facts, finding people who are skeptical of the project isn’t much trouble. The developers shrug it off.
“Nobody has a crystal ball,” said one of the partners, Kevin Hawkins. “The last major downturn (in 2002) was a pretty gloomy time, too, but there was a huge resurgence after that.”
He said he believes Copper Ridge will succeed because the most recent downturn put a lot of competitors out of business and because demand is building.
“Survivors have a larger market share, fewer competitors,” he said. “Everyone is retooling, refiguring. Most national (retailers) are publicly traded, so there is an inherent drive to expand market share. They are figuring out their three-to-five year plans to grow companies.”
In persuading the council to support Copper Ridge, Gary Erickson, another of the developers in the project, said that Nordstrom and Cabela’s have expressed an interest in the project, along with a variety of other high-end retailers.
But Copper Ridge will face serious competition in luring any retailer, let alone retailers that are among the most sought-after in the nation.
Copper Ridge will have to compete with established centers from University Village on North Nevada to Interquest Marketplace at I-25 and Interquest Parkway. The Promenade Shops of Briargate also are close, as is the Chapel Hills Mall.
“(They’re) going to be competing for the same retailers that a lot of other companies are going after, too,” said Mark Useman, a broker with Sierra Commercial Real Estate in Colorado Springs. “It’s going to take some work to draw tenants who want to be in the Springs.”
Among other factors, those prospective tenants are going to be looking at how much retail is already in place, said Jesse Tron, spokesman for the International Council of Shopping Centers.
Developers and retailers use a metric called “gross leasable area per capita,” or how much leased space is available for every person in the area they hope to attract as shoppers.
The Colorado Springs market has 64 square feet of retail space for every man, woman and child who call the area home. The national average, according to Grubb & Ellis real estate, is 55 square feet per capita.
And with Park Meadows a mere 38 miles north and the outlet shops at Castle Rock even closer, not to mention up-and-coming developments such as Interquest Marketplace, the Copper Ridge team will have its work cut out for it.
Useman believes Nor’wood’s Interquest Marketplace will present the biggest competition.
“It already has an interstate exchange,” he said. “It’s visible, accessible to I-25 and can bring in regional traffic. Nor’wood is the largest developer in the city; don’t you think they’re trying to attract those same retailers?”
For the moment, Nor’wood isn’t revealing much more about its plans for Interquest Marketplace.
“The retail market is too unsettled right now. It is certainly a difficult time to do a project that large,” said Fred Veitch, vice president of the development company.
David Moss, general manager at the Chapel Hills Mall, said a new mall would simply cannibalize existing malls.
“We do support the big-box stuff,” he said. “That means more traffic in the area. But the City Council was fed a line that it won’t affect other malls. We’re just spreading sales tax rather than gaining new taxes. We will reach the max.”
Sales tax revenues are starting to creep back up as the economy recovers. In March, sales tax revenues for Colorado Springs increased to $9.15 million, up 2.4 percent from the same month a year ago, and an increase of 6.73 percent above the first quarter of 2009.
Moss has another objection.
“Retailers aren’t going to bite, because there just isn’t the need,” he said. “Our sales per square foot don’t justify a third mall.”
Copper Ridge projects its sales will reach $600 a square foot.
Only the best malls achieve that milestone.
Sales per square foot across the West were $416 in February, an increase of 1.6 percent from the year before, and up from $409 during January, according to the International Council of Shopping Centers.
The best-performing malls are in the Northeast, where the average is $424 in sales per square foot.
Existing retailers also question Copper Ridge’s talk of luring Nordstrom.
Both Chapel Hills and Park Meadows are owned by General Growth Properties, which works with Nordstrom nationally.
“I don’t know where these guys are coming from,” Moss said. “I’ve checked it out. There are no new stores planned for Colorado.”
In his view, if Nordstrom were ever to open a store in the Springs, Chapel Hills would win out over Copper Ridge because of that longstanding relationship.
Jennifer Crowley, general manager for the Promenade Shops at Briargate, less than five miles south of Copper Ridge, said she also doubted Erickson’s projections.
Crowley was referring especially to the project’s hopes of luring Nordstrom, the Cheesecake Factory, both Cabela’s and Bass Pro Shops, and “three or more full-line department stores.”
“His leasing projections are unreachable in this market,” she said. “From our own experience, it’s just not possible to do what he says.”
But the Shops at Briargate is 98-percent leased at the moment, so perhaps the developers of Copper Ridge can’t be faulted for their optimism.
The challenges ahead, however, are great.
The recession hit the shopping center industry hard — vacancy rates are still rising. As of March, shopping center vacancies in the Springs were 11.2 percent, higher than the 10.8 percent recorded in 2009 and much higher than 8.5 percent in 2008.
As a result, landlords have responded by dropping rents. From a high of $14.30 a square foot in 2008, rents now are at $13.50 a square foot.
The combination of low rents and empty spaces mean that national retailers seeking to expand have their choice of location.
Retail sales rose 0.4 percent in the state in April, but still remain below pre-recession levels, according to information from the Colorado Department of Economic Development.
And while some areas — home repair, drug stores and gas stations — did well, there was “broad weakness throughout the retail sector,” the report said.
Nationally, sales at shopping centers were down 1.8 percent in April.
Economists anticipate that weakness to continue as job growth is sluggish and consumers remain wary about spending.
But, again, real estate developers are an optimistic bunch.
Copper Ridge hopes to draw from 800,000 households from northern Colorado Springs, El Paso County and up to Castle Rock in Douglas County.
“We feel a huge void in Colorado Springs,” Hawkins said. “It’s a beautiful area, we’ve had outstanding demographics. There’s definitely demand for regional high-end.”
Under the outlines of their deal with the City Council, Erickson and his partners have until nearly the end of the decade to put their deals together, so time is on their side.
“Maybe Gary has something no one else knows about,” Useman said. “He’s very good at what he does.”
He and his partners will have to be.
Business Journal reporter Becky Hurley contributed to this article.
The Copper Ridge project would add as much as 2.8-million square feet of new retail and other commercial real estate space to the Pikes Peak region — more space than the market’s two largest malls combined. The area’s six largest malls today:
Chapel Hills Mall
Year opened: 1982
Size: 1.2 million square feet
Location: North Academy and Briargate boulevards
Anchors: Macy’s, Dillard’s, J.C. Penney’s, Burlington Coat Factory, Sears
Total tenants: 155
Year opened: 1972-73, updated in 1995-96
Size: 1.1 million square feet
Location: North Chelton Road and East Platte Avenue
Anchors: J.C. Penney’s, Dillard’s, Burlington Coat Factory
Total tenants: 150
First and Main Town Center
Year opened: 2000
Size: 1 million. Up to 1.5 million square feet at build-out
Location: South Carefree Circle and North Powers Boulevard
Anchors: JC Penney’s, Dick’s Sporting Goods, Lowe’s, SuperTarget and Whole Foods
Total tenants: 50 today with 70 at build-out
Broadmoor Towne Center
Year opened: 2002
Size: 635,000 square feet
Location: Southgate Road and South Nevada Avenue
Anchors: Sears, 24Hour Fitness, Home Depot, Ross, Bed Bath and Beyond, Michael’s, Borders
Total tenants: 40
University Village Colorado
Year opened: 2009
Size: 635,000 square feet
Location: north of Austin Bluffs Parkway on North Nevada Avenue
Anchors: Costco, Lowe’s, Kohl’s
Total tenants: 50-60 at build-out
Promenade Shops at Briargate Lifestyle
Year opened: 2003
Size: 250,000 square feet
Location: On Briargate Parkway, just east of Research Parkway
Anchors: Pottery Barn, Ulta Salon, Pier One, Biaggi’s, P.F. Chang
Total tenants: 50
Sources: Mall management companies.