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Metro Detroit retail is back: Here are the hot spots

Posted By: The Detroit News on August 12, 2024.  For more information, please click here to read the source article.

When Stein Mart began closing its stores four years ago, it left a large open retail space in the Gateway Center shopping center in West Bloomfield Township.

The 26,772-square-foot space on Orchard Lake Road got a new use this summer with the opening of PickleRage. The pickleball facility, complete with a pro shop, is among at least three expected for Michigan as the business opens in the state.

“We love these established shopping centers where there’s been a big box retailer in there and the space is now available,” said David Smith, COO of PickleRage. “We love that. We are open to new construction opportunities as well.”

Real estate activity in the retail market lately has been growing across Southeast Michigan, particularly in western Oakland, Livingston and western Wayne counties, according to a recent Colliers report for the second quarter of 2024. Notable leases include the PickleRage facility in West Bloomfield and a Harbor Freight store that recently opened in Livonia, replacing a fitness club.

Other retailers have recently announced their first stores in Michigan, including international value retailer Primark at Great Lakes Crossing in Auburn Hills and apparel company TravisMathew at Somerset Collection in Troy. Sheetz, a popular gas station and convenience store combo, also recently announced four new stores in three Michigan communities: Taylor, Macomb Township and Warren.

The market vacancy rate decreased to 4.9%, a 20-basis point decrease from the previous quarter, according to the Colliers report: “Vacancy rates decreased overall, indicating strong tenant interest, though some areas like Southfield faced higher vacancies.

“Market rents saw a modest increase, with Ann Arbor/Washtenaw commanding the highest rates,” the report continued. “Construction activity was also vibrant, with numerous projects underway, signaling continued growth and investor interest in strategic submarkets.”

Brick and mortar is back

Amid the growth of online shopping, there still remains a desire for physical retail locations, said Benji Rosenzweig, vice president of Colliers Detroit: “The thing that has not changed since COVID and the recovery from COVID, is that there are certain things you just can’t buy online.

“You can’t buy a haircut online, you can’t buy a doctor’s visit online,” Rosenzweig added. “You can order your sandwich or your paint online, but there has to be a physical location for a lot of those things. And so good retail is still good retail.”

Areas seeing growth include experience-based retail, such as pickleball, he said. “Post-COVID, people really wanted to go to places to do stuff as opposed to ordering that experience at home. Part of the reason why the retail market is doing so well right now is because there are new users that are in the market. People still want to go places.”

The cities of Monroe and Troy had the lowest vacancy rates at 3% and 3.3%, respectively, while Southfield had the highest vacancy rate at 8.1%, according to Colliers.

According to a retail market report from Southfield-based PA Commercial, limited development has helped stabilize the retail market in Metro Detroit. Demand is consistent in discount, fitness, and food and beverage. Retailers that have either entered or expanded in Michigan in the past year include discounters Gabe’s, Ross Dress for Less, Burlington and Aldi.

“It’s really market-dependent,” said Matt Schiffman, CEO and managing member of PA Commercial. “In areas like Northville, we’ve seen a lot of health and wellness. We’ve seen an uptick in those activities, whether it’s cosmetics, injection fillers. Those types of things. Med spas have been popular. A lot of health-oriented businesses.”

PA Commercial also noted in its report that consumers are opting to visit retail locations that involve less driving.

Schiffman said that because people are continuing to work from home, smaller suburban downtowns like Northville and Farmington have performed well.

“Those downtowns that have suffered historically just due to low daytime traffic, just through the fact that they don’t have a whole lot of office market to support the lunch business and things like that — we’ve seen a lot of those downtowns perform a bit better historically than they have from what we’d believe to be the hybrid work from home,” he said.

Some areas are experiencing growth in retail construction, with the completion of 11 new buildings totaling 134,842 square feet during the second quarter, according to Colliers. Of that space, 52,018 square feet was delivered in Macomb County, which experts say could be supported by residential building that continues in the northern suburbs.

Projects under construction include the Canton Crossing Shopping Center, 15,000 square feet of retail in Canton Township expected to be complete this year, and 12,574 square feet of retail at the Troy Plaza at Crooks Road and Corporate Drive, which is expected to be complete in early 2025.

Demand for spaces big and small

The PickleRage in West Bloomfield is the first for the New Jersey-based company, which plans to have both corporate and franchise locations, Smith said.

PickleRage plans locations in Grand Rapids and Kalamazoo, and the company is actively searching for space in Sterling Heights. Elsewhere, construction is underway in Jacksonville, Florida, and Glen Burnie, Maryland, and the company has signed leases for locations in Broomall, Pennsylvania, and Mobile, Alabama.

There is a balance to finding the right size location in markets where people are interested in playing the sport. Smith said the West Bloomfield site met the company’s square footage requirement, had high ceilings and enough space between columns to fit nine courts and a pro shop.

“In some cases, we may even go larger, but we need at least 30,000 square feet,” Smith said. “That gets us nine to 10 courts. And that’s the model that works for us. … We have sites we’re looking at that are 40,000 square feet and above that you might put 10, 11, 12 courts in. There’s such a demand for this model that we’re willing to take the risk on even larger sites in the right communities, for sure.”

There is demand for small retailer spaces as well, experts say. Rosenzweig said there is interest from investors in the Rite Aid pharmacy buildings shuttering throughout the state.

“You’re going to see a lot of users who like the drive-thrus that are grandfathered in,” he said. “Whether that’s a coffee shop or a restaurant. I don’t think that most of those are going to be converted to single users.”

Rosenzweig said Colliers represents Advanced Auto Parts, which is making a new push in the market. A business of that size, for example, could take on a 7,000- or 8,000-square-foot former pharmacy, while the larger buildings would get multiple users.

“We’re going to want you to cut it up,” he said. “Those types of users can take a large chunk, but if you have a Jimmy John’s, you can do a Jimmy John’s and Starbucks. Two or three users like that. And cut up that Rite Aid into multiple users and the Starbucks will take the drive-thru, or the Biggby or the Qdoba. Any one of those.”

There continues to be a draw for smaller retail spaces, experts say.

Among the newer smaller businesses is BFame Boutique, which opened last week on Detroit’s west side. The nearly 1,000-square-foot store on Joy Road carries men’s and women’s clothing, accessories and personal care items.

Owner Lukisha Williams is among the most recent Motor City Match awardees to open a business in the city. The program has helped seven retail businesses open in Detroit so far this year, officials said.

BFame is supported by a $45,000 grant that helped with building improvements, Williams said: “It gave me hope, like, hey, I can do this. I learned along the way.”

Williams, who has been in business online since 2018, opened a physical store because her customers wanted a place where they could browse her merchandise.

“People kept asking ‘Do you have a place I can come into?” she said. “When people come in, I know how to cater to my customer. I’m going to treat you like I want to be treated.”