Cruces ripe for concept stores
By ALTA LeCOMPTE
Las Cruces Bulletin
Every year — until this year — someone in the audience at the Business in the Borderplex forum on commercial real estate asked the presenters when Las Cruces might get a Trader Joe’s.
The answer always was roughly equivalent to “when hell freezes over.” Not enough people. Household income not high enough. Probably not in our lifetime.
This year, no one asked — because Kary Bulsterbaum, Steinborn TCN Commercial Real Estate broker, had already alluded to the question.
“We may have our best shot yet at specialty markets like Trader Joe’s,” he said. “Motivated building owners are going to wave a carrot at them.”
He said unique grocers, those “not named Trader Joe’s,” continue to look at Las Cruces.
After describing the negative impact of online shopping on traditional brickand- mortar stores, Bulsterbaum said vacant retail space is creating openings for concept stores that offer consumers an experience not available online.
“Retail interest in our community has never been higher,” he said, “and concept retailers are looking at our community.”
Bulsterbaum and fellow panelist Jake Redfearn, principal, NAI 1st Valley, said the challenge of online shopping to brick-and-mortar stores has created new opportunities for commercial real estate.
Redfearn said entertainment concepts are becoming the new anchors of retail development.
“The nature of retail is changing,” he said. “Entertainment and service concept retailers are expanding.”
He noted the arrival of Top Golf, Crunch Fitness, Rock & Jump and Alamo Drafthouse.
The evolution of retail
“The big picture trade wind is the fallout related to e-commerce,” Bulsterbaum said. “There is probably no industry that’s been affected like commercial real estate.”
Sears and Penney’s are closing hundreds of stores nationwide, he said.
“We are putting Sears and Penney’s on the proverbial watch list.”
While there’s no indication Sears or Penney’s are planning to shut down operations in Las Cruces, the threat of online shopping to Mesilla Valley Mall is “significant,” he said.
Last year, $119 billion in online purchases were made after customers first visited a brick-and-mortar store.
“In a lot of ways stores are becoming online fulfillment centers,” he said.
The big question is whether landlords will be willing to rent to local and regional retailers when national stores pull out, he said.
“Department store space could be absorbed more and more by local and regional retailers.”
Where the action is
The biggest growth sector is the medical sector, a trend Bulsterbaum expects to continue in Las Cruces, which has a large aging population.
Also growing are health-related retail businesses such gyms and weight-loss centers.
“They’re growing at twice the pace of any other retail center,” Bulsterbaum said.
Redfearn said construction in the medical sector was up 21 percent in 2016, with new facilities including a VA center, Ben Archer facility and a $7 million skilled nursing center still under construction behind Golden Mesa retirement community.
Other major commercial projects permitted in 2016 included a hotel on Telshor Boulevard and a new Vescovo auto dealership on Valley Drive. A permit has been pulled for a clubhouse at Red Hawk Golf Course, but construction has not started, he said.
Single-family housing construction is experiencing double digit growth.
At the same time, industrial opportunities are needed, but there are issues with pricing, functionality and flexibility, Bulsterbaum said.
He said the occupancy rate for office space is 90 percent and “getting healthier,” with average time on the market declining and the re-let market showing slow but consistent improvement.
In Downtown and on El Paseo, retail and office vacancy rates are almost double that of other neighborhoods, Bulsterbaum said.
“I have to think a high percentage of that space will have to be repurposed,” he said. “It’s important for the business community and government at the very highest level to take a look at using that space as corporate and federal office space.”
Redfearn said office lease rates are highest and vacancy rates lowest in the East Lohman Avenue area. “The Lohman/Telshor area continues to be ground zero for retail development or re-development, he said. “A new Planet Fitness, Rudy’s BBQ, Sportsman’s Warehouse and Comfort Suites are driving up land values in the area.”
He said 2017 and 2018 would see the re-development of underutilized properties into new chains.
Redfearn said the former Hastings Entertainment Inc. on Lohman Avenue has been leased to a concept store.
“For the past few year I’ve been prophesying people have to look outside that area, but Hastings moving out created an opportunity for those who had been buzzing around for several years, he said.
Redfearn said the East Mesa is growing incrementally, but lack of population growth and housing starts
is slowing commercial development. On the other hand, he said, The Game II Sports Bar and Big-O Tires have opened, Wendy’s is under construction and several deals have been completed with national users.
Like Bulsterbaum and Redfearn, panelist Brett Preston stressed the positive impact on the Las Cruces commercial real estate market of the continuing rapid growth of El Paso.
Preston, who is managing partner of Cushman & Wakefield in El Paso, covered the commercial real estate scene in El Paso and Santa Teresa, noting growth in El Paso is spilling into Santa Teresa and suggesting that growth would push north into Las Cruces.
“El Paso is the elephant, and you get to ride herd with it,” Preston said. “This (Santa Teresa) is your economic driving engine for Doña Ana County.” Alta LeCompte can be reached at lecompte. firstname.lastname@example.org or 575343-7478.