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<br />Vacancy Declining
<br />Absorption Dropped off
<br />Rental Rates Flat
<br />Highlights
<br />• Neighborhood centers, which typically are anchored by a grocer or drugstore, experienced a drop in vacancy to 6.5% (7%
<br />including sublease space) from 7.1% six months ago. However, absorption fell to 199,803 sq. ft. from an impressive
<br />633,004 sq. ft. at year end. There are 285 neighborhood centers comprising nearly 18.2 million square feet in the metro.
<br />• Only two neighborhood centers are under construction: United Properties is developing the 75,000-sq.-ft. Victor
<br />Marketplace at County Road 14 and Victor Garden in Hugo, which is anchored by Festival Foods. It will open in third-
<br />quarter 2006. Also, the 61,200-sq.-ft. Wedgewood Village is being built by Capital Growth in Mahtomedi at Wildwood Road
<br />and Century Avenue. Aldi will anchor the center, which is scheduled to open in third-quarter 2006.
<br />• Another SO centers totaling 529,320 sq. ft. are planned with groundbreakings slated for 2006 and 2007.
<br />• "Spotty," however, might best describe neighborhood center development. t' min tou her ~ ~ n d
<br />land is ve ex ensive so develo ers are bein f r k like Hugo, Orono Elk River nd Forest
<br />ke. Also, if a developer does find a site, plans are not necessarily a "slam dunk" with the city. For examp ,Reliance
<br />Development Co. is planning a 72,000-sq.-ft. neighborhood center called Diffley Marketplace at Diffley Road and Lexington
<br />Avenue in Eagan. It will be anchored by a 43,000-sq.-ft. Redermacher's Fresh Market. The Eagan City Council gave final
<br />approval for the 11-acre development. However, because the plan met with resistance from many neighbors, the city
<br />approved it with a condition that prohibits access to the development from a residential street called Daniel Drive. The
<br />county has said it will not approve the plan without this aaess point. Therefore, the council's decision basically ties the
<br />hands of the developer. The project is currently on hold as a result.
<br />• Also impacting neighborhood center development is two of the largest grocery stores changing their paradigms. Roundy's,
<br />which acquired Rainbow Foods several years ago, is still trying to fgure out if it wants to develop new stores in the metro,
<br />and Cub Foods is switching gears from being a tenant to wanting to own its sites. Meanwhile, the grocery market
<br />continues to face stiff competition. For example, Coborn's, previously an out-state grocer, is now right at the door of the
<br />Twin Cities; it already has stores in Clearwater, Sartell and Ramsey. Aldi is rapidly growing and has plans for approximately
<br />30 metro-area stores. Festival Foods is also growing with new stores in Hugo and a redevelopment in Bloomington.
<br />• Wal-Mart and Target's super stores, with full grocers, also are taking a big bite out of traditional grocers' profits. There is
<br />no longer any stigma associated with shopping at discounter Wal-Mart. While grocers can't compete with Wal-Mart on
<br />prices for essentials like diapers, many are working to draw shoppers by adding convenient features like fresh flowers and
<br />beefing up their delis and adding home meal replacement. (Many time-crunched shoppers want freshly prepared take-
<br />home meals that are a step up from traditional fast-food). Some grocers are trying to create a niche by offering shoppers
<br />a nicer environment and adding convenience.
<br />• Some active in-line, small-shop retailers include hair salons like Cost Cutters, SuperCuts and Great Clips, tanning salons,
<br />fast-casual restaurants and banks. Also, Fed Ex/Kinko's is looking for new sites. Others include Winestyles, Mathnasium,
<br />Slim for Life, Moe's, and Genghis Grill. Those looking for locations include Homemade Pizza, Salad Creations, and Gimme
<br />Sum.
<br />• When it comes to a ay~pt~, Bella opened a new location in Blaine and also opened the View Restaurant & Lounge, 2730
<br />W. Lake St., in the Calhoun Beach Club in Minneapolis. Axel's Bonfire is expanding in the metro with more locations,
<br />including its Rudy's Redeye Grill concept. Raising Cain is a new fast-food chicken restaurant looking for sites in addition to
<br />http://outlook.uproperties.com/PagePrinter.aspx?InstanceID=bS dc3 874-23ec-45bc-9750-47... 8/8/2006
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