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Retail Rising

While housing development and office leasing struggle in the Northern San Joaquin Valley, the jingle of cash registers still spurs retail growth.

From Turlock to Ripon, shopping centers of all sizes are being built or have just opened. Locally owned stores and chain outlets are snapping up the space.

Experts say there are a number of reasons why retail development is still on the rise, from a need for stores in new neighborhoods to consumer spending not yet affected by a slowing economy.

"Any time you have people under new rooftops, they have to buy goods," said Duke Leffler, president of PMZ Commercial Real Estate. "You look around, and there's not much vacancy in retail."

New, modestly sized centers may be the most visible sign of the trend. They seem to be gaining momentum throughout the Northern San Joaquin Valley, where Stanislaus, San Joaquin and Merced counties saw double-digit increases in the number of homes and apartments from 2000 to 2006, according to recently released U.S. Census Bureau figures.

Whether on major thoroughfares or just down the block, shopping centers seem to be under construction, newly opened or undergoing face-lifts.

Principal city planner Steve Mitchell said stores often begin to appear in a part of a town that added a lot of new homes.

Look no further than popular Village I, which contributed to Modesto's 7.1 percent housing and apartment gain from 2000 to 2006.

"There does seem to be a demand for retail, especially on the east side of town now," Mitchell said. "That's where there's all the new residential development."

The newly opened Village One Plaza at Floyd and Roselle avenues is more than 80 percent leased. Eastgate Plaza at Briggs-more Avenue and Oakdale Road, along with Village Corners at Claus Road and Sylvan Avenue, also are filling a longtime void that's forced many east Mo-destans to take annoyingly long trips to shop.

Convenience draws shoppers

For Sara Lopez, 20, Village Corners and Village One Plaza are closer, better choices for shopping because she lives on Geer Road, southeast of Modesto.

"I used to go get groceries in Waterford, and now I'll go to Raley's," she said of Village One Plaza's anchor tenant, as she took home two smoothies from Smoothie King at Village Corners. "Before this place, we almost had to go to McHenry Avenue."

Amid the news of foreclosures, bad loans and declining home values, spending continues. Friday, the U.S. Commerce Department reported that August retail spending had increased 0.3 percent.

Analysts consider the figure lower than expected, but retail sales continue to power the economy -- and the area's business decisions.

The Modesto Planning Commission last week approved requests from two developers who asked the city to allow them to include more retail in their projects.

Eastgate originally was set to include retail and office space, but the requested plan change made it mostly retail. A project on Pelandale Road in north Modesto was set to include retail and a movie theater, but the developers asked for a development extension and the right to make the center all retail.

But will it last?

Still, some experts said the spending trend isn't destined to last. As credit tightens and more consumers struggle to sell their homes or refinance their loans, they'll put the brakes on their discretionary spending.

"Retail is always the last product line to be affected by a slowing economy," said Xavier Santana, who specializes in retail and investment development for CB Richard Ellis in Stockton. "If sales drop by 5 to 15 percent, then stores like Wal-Mart might stop opening new stores."

Michael Neimira, chief economist and research director for the International Council of Shopping Centers, said the perception that retail development is doing well may be because it hasn't slowed as much as housing and office development.

"The other part of the equation is how retailers themselves are doing," Neimira said. "Their profits are doing quite well, but that's more because they're cutting expenses."

Car dealerships, which often mirror housing's fortunes, have reported slowing sales through the first half of this year, though there was a sturdy uptick in August, according to the Commerce Department.

Leffler, of PMZ, said another factor may curb retail growth in the near future: a lack of space.

"There's not many corners left, but the city is still hungry for those sales tax dollars," he said. "We have no more supply, so you might see more tear-downs and remodels."

That's been a visible trend throughout Modesto, from the City Gate Shopping Center at the intersection of Sisk Road and Standiford Avenue to North Point Landing on McHenry Avenue north of Sylvan.

New or remodeled, if it's up to Katreen Lajeen of Modesto, more retail is the way to go.

"We have enough houses, especially when you hear about the foreclosures," said Lajeen, 20, who lives near Eastgate Plaza. "They need more retail stores, and more stores that you find in other cities, like Old Navy."

Bee staff writer Ben van der Meer can be reached at bvandermeer@modbee.com or 578-2331.

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