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Page 1 of 2 <br />Print this Page <br />• Construction continues at record-setting pace; absorption remains very strong <br />• Retailers and developers recycle inner-ring real estate to enter desirable, densely populated markets <br />• Regional malls redefine, reinvent themselves <br />The Twin Cities retail market is still going gangbusters with a drop in vacancy to 8.5% (8.8% with sublease spate) from 6.4% six <br />months ago and more than 3 million square feet of positive absorption in the past 12 months. And it's not about to stop any time <br />soon. Demand continues to outpace supply, and another 2 million square feet is under construction with much of it pre-leased. <br />Also, another 3.7 million square feet is planned with start dates set for later in 2006 and 2007. <br />Community centers, typically anchored by two big-box retailers, are the growth engine; they boasted 655,564 sq. ft. of positive <br />absorption in the first half of 2006, resulting in more than 1.2 million square feet in the past 12 months. This strong activity helped <br />further push down their vacancy to 2.8% (3.2% with sublease space), a drop from 3.7% at year end. This may be the lowest-ever <br />historical vacancy. Seven community centers totaling 1,645,000 sq. ft. are under construction with another 3,187,000 sq. ff. <br />planned. <br />Target/Wal-Mart Spur Growth <br />Target and Wal-Mart continue to fuel retail development as they compete far market share and expand their "super" formatr. <br />Three superTargetr are planned or underway, and Target also is aggressively pursuing "scrapes" where it razes traditional stores <br />and builds SuperTargetr. Scrapes occurred in West St. Paul and Roseville and are approved in st. Paul's Midway and in Edina. <br />Meanwhile, Wal-Mart expanded with stores in West St. Paul, Inver Grove Heightr, Woodbury and St. Anthony and is going "super` <br />where it has available land, including Vadnais Heightr and Oak Park Heights. <br />Redevelopment Is Name of Game <br />As the supply of attractive retail sites continues shrinking in the highly sought-after, inner-ring and core cities, developers and <br />retailers are being creative in redeveloping and recycling existing spaces. Retailers are buying nontraditional properties- <br />particularly in the Interstate-494/694 loop-and redeveloping them into retail. Hot spotr include 50th and France and other Edina <br />neighborhoods, downtown Wayzata and st. Paul's Grand Avenue. Wal-Mart, for example, is looking at redeveloping the former <br />Best Buy headquarters in Eden Prairie. Target is redeveloping its Midway store and acquired the adjacent Four Pointr Sheraton in <br />order to build a SuperTarget. Haugland Company is redeveloping the southwest corner of 50th and France into retail and condos, <br />which included scraping an Arby's. Cypress Equities is demolishing a movie theater in Edina to develop retail and condos. <br />However, developers will attest that redevelopment often is complex, costly and time-consuming. The price can be double that of <br />conventional retail sites. Retailers hope that by gaining access in high-density, well-established markets, their strong sales will <br />support these more expensive redevelopments. <br />Regional Malls Evolve <br />Retailing never stops changing, and regional malls never stop evolving in their quest to attract shoppers. While sales remained <br />strong, the vacancies at Northtown and Brookdale continued to affect the malls and surrounding properties. Both properties are in <br />the process of repositioning themselves by adding both traditional and nontraditional anchors. Northtown added Burlington Coat <br />Factory and Steve & Barry's, and Home Depot is underway. Brookdale is planning on redeveloping sections of the property. <br />Meanwhile, stronger regionals are adding open-air, lifestyle elements to stay fresh. Rosedale's $40 million lifestyle center <br />component will include an AMC movie theater, Granite City Brewery, Borders Books, and many more. Southdale also may <br />undertake a lifestyle conversion at some point and also has been in talks with upscale anchors Nordstrom and Neiman Marcus. <br />Fast-Casual Offers Recipe for success <br />The "fast-casual" concept~ombining fas[-food's quick service with high-quality, fresh food-continues to be a popular trend. <br />Examples are Chipotle, Panera Bread, Salsarita's Fresh Cantina, Pei Wei and the new Cosi cafes-a mix between a coffee shop, <br />http://outlook.uproperties.com/PagePrinter.aspx?InstanceID=340d9a3e-e688-4fc 1-b5e1-472... 8/8/2006 <br />Retail Enjoys Robust Activity, Led by Community Centers <br />