Sunday, October 23, 2011

Scottsdale Waterfront rides wave in low tide

The retail portion of the Scottsdale Waterfront, a high-profile, mixed-use complex south of Scottsdale Fashion Square, continues to face challenges as corporate retailers pull out.

The Waterfront includes more than 95,100 square feet of ground-floor retail space. It spans Camelback Road from Scottsdale Road west to Marshall Way, and then along Marshall south to the bridge. When it opened in 2005, about 95 percent of the retail space was leased.

Borders bookstore was the anchor tenant, encompassing more than 26,000 square feet in a high-profile spot fronting Camelback Road. It was among the first businesses to open at the Waterfront, along with P.F. Chang's China Bistro, Urban Outfitters and Sur La Table.

In February, Borders Group announced it had filed for Chapter 11 bankruptcy reorganization, and was closing eight of its Arizona locations, including the Waterfront store, which closed in April.

On Dec. 31, Priscilla of Boston bridal salon will close. The store opened in December 2009. Corporate parent David's Bridal is closing all of its Priscilla of Boston stores.

"This decision allows us to focus our resources on our sister division, David's Bridal, to further accelerate David's growth and strengthen our leadership," spokeswoman Christy Rabil said.

The retail portion of the Waterfront is owned by Metzler of North America, a Seattle-based boutique real-estate investment bank. Its portfolio includes high-profile commercial properties throughout the United States.

Metzler officials couldn't be reached for comment.

"Quality developments in prime locations historically have always been successful and the Waterfront is no exception," said Bret Sassenberg, principal of Ground Up Development and development manager for Scottsdale Waterfront LLC.

"It may be only a matter of time for things to shake out but this is a very desirable corner for retailers and that will be evident when we are all looking back on this recession."

Leases and vacancies

The retail portion of the Waterfront is 64.4 percent leased, said Megan Dugan, senior property manager with Main Street Real Estate Advisors. There are four vacancies.

Zoe's Kitchen, a Birmingham, Ala.-based national chain, opened its third Arizona location in July, and Primp and Blow, a Scottsdale-based blow dry bar owned by Melodi Harmon, opened Oct. 8.

Harmon's Waterfront salon is larger and includes more employees than her first location at Thompson Peak Parkway and Hayden Road.

"I just feel like this is a great place for this concept . . . with all the high school kids and the . . . mothers and daughters," she said. "And down here we get a lot of tourists because of all the hotels. With all the restaurants and nightclubs, and people going out and the parties, this is a really fun location. This will definitely be the busier location."

As for the Borders space, there's been a lot of interest, but the key is "being patient in finding what's right for the center," said Golden St. John, leasing agent with the Corritore Co., a Scottsdale-based specialty retail broker.

"Right now there's no one that I can announce that we've talked to in the past or are currently talking to, but there's definitely been a lot of interest in space just because of the presence here and it's a great real estate site," he said.

The Borders space may be divided to accommodate more than one tenant, St. John said. The first and second floors may be leased separately, or the entire square footage may be broken into several smaller spaces, he said. Also, the adjacent space vacated by Isaac Jewelers may be incorporated into the Borders space, he said.

"We did have one tenant who called us immediately and wanted to take it as is . . . but the landlord (Metzler) looked at that option and said 'I don't know that that puts us in a better place than we were in before,' " he said. "So they really don't want to put a Band-Aid on the problem."

Sassenberg said he would like to see Lucky Strike Lanes "or something that would dramatically increase foot traffic" open in the space vacated by Borders. Lucky Strike, a lounge-style bowling alley, opened in late August at CityScape in downtown Phoenix.

Having two corporate closings - Borders and Priscilla of Boston - creates a challenge for marketing the property because "people may get the perception that it's because the center is not doing well," St. John said.

"But if you look at it, we're right across from Fashion Square, which is one of the top malls in the country; we're at the best intersections in town, so it's great real estate," he said. "It's just the unfortunate circumstance of certain tenants not being able to survive the current climate."

Looking ahead

The biggest challenge for the Waterfront will be "just being patient and doing what's right for the center," St. John said.

"A lot of landlords, I think, are forced to be reactive, due to either monetary situations or other variables they're dealing with," he said. "Luckily Metzler is in a position where they can really take their time and ultimately make a decision based on what they feel is right as opposed to having to choose something just because they're in a pinch and they need to fill the space."

Rick Murphy, senior vice president at real-estate brokerage CBRE, said the Waterfront likely will not have a difficult time filling the vacancies created by Borders and Priscilla of Boston because it's a "great location."

"It's all about location," he said. "They'll lease and they'll be on their way."

Murphy also said the volume of chain-store closings is now slowing compared to during the height of the recession.

In the meantime, Scottsdale Waterfront LLC is planning the next phases of the Waterfront behind the Nordstrom parking garage and east of Goldwater Boulevard. The phases will include mostly condominiums with some commercial space.

by Edward Gately The Arizona Republic - Oct. 20, 2011 01:52 PM

Scottsdale Waterfront rides wave in low tide

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