Pittsburgh Business Times
RCB Equities to develop outdoor shopping center in Marshall Township
Tim Schooley
April 29 , 2005

As it seeks to develop North Ridge Promenade, a 100,000-square-foot lifestyle strip development in Ohio Township, RCB Equities also has bought another piece of property in Marshall Township.

There, at a site that straddles Route 19, Warrendale-Bayne Road and Interstate 279, RCB is looking to develop another 100,000-square-foot strip shopping center.

"We're fine-tuning the plan," said Patrick Kellner, a principal of RCB, who further described the project as in its approval and pre-leasing phase.

Nationwide, the development of enclosed regional malls may have nearly stopped, with only a handful under development, including the Pittsburgh Mills project in Frazer Township.

Yet the demand for smaller outdoor strip centers such as those under development by RCB Equities remains strong, buoyed in part by the trend toward new lifestyle developments that emphasize fashion and dining.

Last week, the ongoing strength of retail strip centers was further emphasized by the closing on the sale of the Casto-Skilken portfolio -- a handful of shopping centers throughout the region that comprise more than 1.8 million square feet of strip center retail space.

"The outdoor community centers have become the fair-haired property these days," said Paul Pearson, principal of New York-based Pearson Partners, the equity partner of a buying group that also includes Johnstown-based Zamias Services Inc.

"People like the outdoor and convenience of the community center," added Mr. Pearson.

Mr. Pearson added that the new owners expect to reinvest to upgrade the shopping centers, which include the Miracle Mile shopping center in Monroeville and the Great Southern shopping center in Bridgeville, along with others.

Mr. Pearson's assessment is echoed by the retail industry.

A recent research report issued by PriceWaterhouseCoopers noted that demand for strip shopping centers is "nearly insatiable."

FacilitiesNet News, an industry trade publication, noted that mall rents have gone down slightly, to $37.75 per square foot, at the same time that strip center rents have increased to more than $18 per square foot.

Mr. Kellner noted the historic evolution that saw malls begin to seek rents that priced themselves out of the market for many retailers, giving strip centers new opportunity to attract a broader assortment of shops.

"The better developers are actually going out and merchandising their strip centers," he said, emphasizing that they seek to create a theme for their projects rather than sign leases that meet rent demands.

"I would think Pearson and Zamias (have) an excellent opportunity to remerchandise these centers," he added.

Mr. Pearson noted that its new collection of shopping centers currently have a vacancy rate of approximately 15 percent. Many of the tenants among the properties are stable, long-term leases, he added, meaning any changes to the properties will come gradually over time.

While he had no estimates on how much the partnership would invest to improve the properties, Mr. Pearson noted that many of the shopping centers hadn't see any major investment since the 1980s.

"We're doing our planning now," he said. "But it should be considerable," he added of new investment the centers should see.

Mr. Pearson also sees considerable demand from specialty retailers to be in more than one of the firm's new shopping centers.

"It's one-stop shopping. A couple of retailers were intrigued to have multiple locations within the portfolio," he said. "We think that's a big plus in that these properties under the prior ownership did not cross-market them."

"With new ownership, you get an injection of energy and sometimes capital. That can't be a bad thing," said Anthony Dolan, a principal of Walnut Capital Partners.

Mr. Dolan also added that he expected the region's older shopping centers to see rents rise to better match those at newly built projects.

While Mr. Pearson said that he liked Pittsburgh's demographic strengths and geographic constraints, Mr. Dolan emphasized that the region's development challenges made it hard to compare it with national trends.

Along with owning a handful of important properties on Walnut Street in the city neighborhood of Shadyside, Walnut Capital also has a number of strip center developments under way throughout the region. Next week, the company expects to break ground on Lake Side Plaza, a 10,000-square-foot strip center in Peters Township.

"When we're looking for a small retail plaza to put in place, I'm looking to see how we can capitalize on existing retail, but also improve upon what's out there in terms of visibility and accessibility," he said. "What our market has lacked in certain parts of our trade area is that kind of retail."

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