By Jodi Schwan

It would be natural to think retail might be slowing down in Sioux Falls.

Sales tax revenue is barely growing.

Recent months have brought news of closures tied to national downsizing or shutdowns of chains, including Kmart, Payless Shoes and Wet Seal.

And a lot of new national stores and restaurants already have announced plans to come to the market or open here.

But the brokers representing the city at this week’s RECON convention – the world’s largest retail real estate convention, hosted by the International Council of Shopping Centers – say enthusiasm from retailers looking at the city hasn’t slowed.

“Retail has had its ups and downs, and for the last three or four months the reports were not good, and, of course, the store-closing announcements had everybody kind of tenuous,” said Raquel Blount, vice president of commercial real estate for Lloyd Cos.

“But things are still really strong here. I don’t know how you can say retail isn’t strong in our market, when Lake Lorraine is coming out of the ground with more than 150,000 square feet (of new retail). We’re seeing activity.”

Lake Lorraine is the center of national retail growth in the market this year, with new names DSW, Marshalls, Home Goods, Ross Dress for Less and Carter’s OshKosh planning to open in the coming months.

The developers of that site – Van Buskirk Cos. and Friessen Development – are in Las Vegas this week in search of yet more retail. There’s about 100,000 square feet still available, and the plan is to fill it with smaller shops and restaurants.

“It’s a new slew (of prospects),” Mike Van Buskirk said. “Some of them have been two or even three years in coming, and the last lineup really came through meetings (at RECON) last year. Now, it’s truly a transition. Many smaller retailers don’t care about your project until they see your junior boxes out there, like we have. Now, they’re getting engaged.”

Retail closures also present opportunities. Vacant spaces like two former Kmart stores and the former east-side rue21 are able to be marketed to retailers that want to grow.

“Some of those closings are healthy,” said Scott Blount, a commercial broker at Lloyd Cos. “I fully believe that. It’s the natural cycle of things. Out with the old, in with the new.”

Prime sites

Several areas around the city might start to catch national retailers’ eyes this week.

The current Hobby Lobby, for instance, is available because the retailer is moving to a larger space at Lake Lorraine. Located on busy 41st Street, it’s a rare opportunity to lease a piece of up to 68,000 square feet.

“It’s a big site,” said Van Buskirk, who is marketing it. “We really just started marketing it recently, but we’ve already got serious talks with somebody. This could easily be a deal where we subdivide down, or we could find one or two tenants. It’s pretty flexible how that could develop.”

Another move to the Lake Lorraine area – this one from Sioux Falls Ford Lincoln – is opening up significant room to grow on the campus of The Empire Mall. The area is expected to attract new national retailers and restaurants and could start construction in the next year.

Another new retail center already is underway next to the mall, on a vacant site next to Old Chicago and two hotels.

Fazoli’s plans to open there this summer, and more space is available.

There also are two groups seriously looking at the former District space on the mall campus, Scott Blount said.

“There’s definitely interest,” he said.

West 12th Street also has seen growing interest from national retailers, attracted by its high traffic volume and redevelopment sites.

Harbor Freight Tools and Dollar Tree are planning to open in a renovated retail center west of the vacant Kmart. Both plan to open by the holiday season.

“The traffic is incredible,” said Ryan Tysdal, who recently joined the commercial brokerage team at Van Buskirk Cos. and did the Harbor Freight and Dollar Tree deals,

“We’re working on several projects that are really going to bring new life to that corridor,” he said. “It will include at least one brand-new restaurant and retailer to the market.”

Expansion opportunities

The RECON convention also is a chance for brokers to reconnect with existing national relationships. Many chains that have a location or two in Sioux Falls are open to adding more as the city grows.

National retailers looking to open a second location in Sioux Falls traditionally have been drawn to the east side.

PetSmart plans to open its second Sioux Falls store at Dawley Farm Village this summer, and other national names also are looking at the development, Raquel Blount said.

There is property available north of PetSmart and additional land south of 18th Street, which is planned as the next phase of development there.

“Dawley is a good opportunity for retailers, but we have to make the shift to south of 18th Street,” she said.

In southern Sioux Falls, the Walmart effect also has shown itself in a big way. In the past year, several national retailers have opened or announced plans to expand at 85th Street and Minnesota Avenue, including Burger King, Hardee’s, Pizza Hut, Valvoline and Verizon Wireless.

Another new retail center will start construction near Burger King this summer.

“We have one endcap leased and are working on a deal on the other endcap,” said Tysdal, who represents it. “85th and Minnesota has been very busy with buyers.”

Other emerging areas for retail include the intersection of 69th Street and Louise Avenue, which has land for retail tied in with the planned Avera on Louise campus as well as on the northwest side of the intersection.

There also are options in retail centers in newly developing areas such as 85th Street and Louise Avenue, where Van Buskirk already has brought Subway and sees room for more national names.

“A lot of the space we’ve got available could fit the bill with this show,” he said. “And down at 85th and Minnesota, we represent land that has enough acreage to accommodate most anything that can come along.”

There are challenges to landing retail deals, however. The rising cost of land and rental rates can cause some retailers to pause.

“I think the perception of people would be that Sioux Falls would be a very economical market, but we’ve got strong market rents and low vacancy, which is good,” Raquel Blount said.

And despite packed days of conversation about deals in the city this week, the moves themselves likely won’t happen fast.

“It’s still a very long process,” Raquel Blount said. “To do the large national deals, it’s a minimum of 12 to 24 months.”