Adding more than 700,000 square feet of retail space to the Fairfield County market, General Growth Properties’ SoNo Collection mall is expected to compete head-to-head for tenants with downtown shopping districts in high-income towns such as Westport and Greenwich.
Ralph Lauren, Kate Spade and Michael Kors stores have exited the scene in downtown Greenwich, the posh retail district that’s Connecticut’s answer to Rodeo Drive.
The luxury clothiers are among the recent departures that have left more than 30 vacant storefronts on Greenwich Avenue, where rents for prime spaces can fetch up to $130 per square foot.
Local real estate brokers said they’ve seen such drastic fluctuations in the market before, most recently during the Great Recession. Since then, e-commerce has emerged as an ever-growing challenge to brick-and-mortar retailers.
But it’s competition of a more traditional sort that’s in play in Fairfield County: General Growth Properties’ 700,000-square-foot SoNo Collection mall now under construction in Norwalk, with more than 60 percent of its space leased in anticipation of a late 2019 grand opening.
“GGP are the smartest guys in the industry and they have strong relationships with the best retailers,” said Jonathan Gordon, CEO of Bronxville, New York-based Admiral Real Estate Services. “Even if enclosed malls are struggling right now, the way they’re going to do it is going to be somewhat successful.”
Chicago-based GGP is betting against the conventional wisdom in an industry where open-air lifestyle centers and mixed-use developments have dominated new projects in recent years.
Nordstrom and Bloomingdale’s will anchor the $525 million Norwalk center and occupy approximately 300,000 square feet. Up to 100 shops will occupy the 343,000-square-foot in-line spaces. The property is over 60 percent leased amid “overwhelming” community interest in the project, GGP CEO Sandeep Mathrani said during a conference call this month.
GGP’s confidence in SoNo’s prospects reflects location and Fairfield County’s affluent demographics. Nearly 170,000 vehicles pass the site daily, according to GGP marketing materials. And the mall’s primary trade area of approximately 215,000 households has an average annual income of nearly $142,000.
As GGP continues SoNo’s lease-up, the effects are still playing out across Fairfield County. The company hasn’t announced additional tenants beyond anchors, but it’s expected to pose direct competition to downtown districts including Greenwich and Westport. GGP acquired the 12-acre site for $35 million in 2012 and received final local approvals in 2016.
“They’re dropping 770,000 square feet of new retail space in the market,” said Jessica Curtis, a senior managing director and retail broker in Newmark Knight Frank’s Stamford office. “That’s going to suck some life out of the downtowns. We can’t support that much retail.”
Westport Retail Vacancies Decline
Graphic courtesy of Admiral Real Estate Services/CoStar Analytics
Downtown Westport is recovering from the addition of Bedford Square, a mixed-use development that opened in March 2017 and added 120,000 square feet of retail inventory to the market.
Retail vacancies in Westport have declined from 16 percent at the end of 2016 to 13 percent in November 2017, according to data compiled by Admiral Real Estate Research and CoStar Analytics. But the opening of the SoNo Collection will provide another test for the market, Admiral Real Estate’s Gordon said.
“I imagine it’ll somewhat siphon off some of the consumer dollars, but I don’t think it’s going to be devastating,” he said.
One opportunity for downtown districts is to attract more multichannel retailers that combine strong Internet presences with unique smaller showroom-type stores, Gordon said. High-end fitness chains such as Orangetheory and SoulCycle also fill some of the excess inventory. But locations can be tricky to site in some towns including Greenwich, which has zoning prohibiting fitness clubs and spas on ground floors, Curtis noted.
East Hartford Outlet Mall Hits Pause
Retailers’ shrinking store footprints and decelerating new store requirements and high development costs have scaled back and delayed one of Connecticut’s most-watched projects, The Outlet Shoppes at Rentschler Field in East Hartford.
Despite offers of $24.5 million in public incentives in the form of a state grant and local tax abatements, Illinois developer Horizon Group Properties reduced the project from 348,710 to 282,000 square feet last year, or approximately 70 stores, with expansion potential to 420,000 square feet. Ground was broken in November, but halted shortly thereafter following a loss of construction financing.
Horizon Group was not available for comment. The next milestone is a March 31 expiration of Horizon Group’s ground lease with property owner United Technologies.
Throughout the 37.6-million-square-foot Greater Hartford retail market, the vacancy rate was 11.1 percent in August, according to a research report by KeyPoint Partners of Burlington, Massachusetts. That’s down from the peak of 13.1 percent in 2013, with health and fitness operators posting the biggest gains by retail category.
