Older, smaller centers find ways to compete

Center owners prove that bigger isn’t always better

By: Mike Mathis
   On Central Jersey’s shopping center landscape, bigger isn’t always better — or more prosperous.
   Despite the large number of power centers that are under construction and that dominate the sides of major highways in the region, real estate experts say the area’s older, smaller centers are faring well by upgrading their properties and attracting smaller, nationally known retailers, restaurants and locally based, service-oriented businesses.
   Companies such as Dunkin Donuts, Quiznos, Subway and the women’s fitness center Curves actually seek out small shopping centers, because patrons of those businesses want easier access and less traffic than what is found at power centers, said Matt Henderson, director of the commercial group for Princeton Real Estate Group in Princeton.
   "They get to capture and secure a niche customer," Mr. Henderson said of the smaller, older centers. "(Retailers are) looking for locations where people can literally pull in and pull out. (Customers) want to be in and out in five minutes."
   Outdoor strip shopping centers also are service oriented, so they tend to attract businesses such as small grocery stores, drug stores and dry cleaners, said Mark P. Hill, executive director of leasing for Hilton Realty Co. of Princeton.
   Hilton Realty operates 10 shopping centers between the Jersey Shore and Montgomery County, Pa., including the Pennington Shopping Center in Hopewell Township and the Montgomery Shopping Center in Montgomery Township. "Everyone has to eat, and everyone has to get their dry cleaning," Mr. Hill said.
   Some older centers and freestanding stores are being expanded or retrofitted for newer uses.
   For instance, a Whole Foods Market opened in space formerly occupied by a Pathmark supermarket and Zany Brainy toy store at the Shops at Windsor Green in West Windsor. And a Grand Union supermarket near Princeton was transformed into a health club.
   At the Parkside Plaza shopping center in Ewing, Hilton Realty assembled several parcels of ground to construct a new building, Mr. Hill said. A grocery store was expanded and refurbished, a new façade was installed, and new islands, landscaping and a fresh coat of blacktop were added to the parking lot, according to the company’s Web site.
   "(The market) is ever changing, not only for the older strip centers, but for the larger box users," Mr. Hill said. "You have to stay with the times. To get a mix (of businesses) is a tough thing to do."
   Bob Southwick, president of the Mercer County Association of Realtors, said the market for space in smaller shopping centers in Mercer County has strengthened since last year.
   Mr. Southwick said older, smaller shopping centers are succeeding because of their diverse offerings, which is possible — in part — because rents are typically lower than those of the power centers.
   "There was a time when (older centers) were empty, when the big boxes came in, but now they tend to be a bit more eclectic (in their tenants)," said Mr. Southwick, who is a broker associate with Weidel Realtors in Princeton. "Generally, those stores are more of a niche market."
   For example, Pintinalli Inc. of Lawrenceville has attracted a high-end Indian restaurant, an Indian grocery store and a KinderCare Learning Center to the Village Square Plaza in Lawrenceville, firm owner Joseph E. Pintinalli said. Talks also are continuing with a finance company that Mr. Pintinalli declined to identify.
   Pintinalli Inc. purchased Village Square Plaza five years ago and is undertaking a major expansion and redesign of the 15-year-old center, Mr. Pintinalli said.
   "We didn’t want anyone to come in and just gut a space," Mr. Pintinalli said. "You have limitations with centers which are poorly developed, and it’s very hard to make them work."
   At Village Square Plaza, Mr. Pintinalli said his company has worked to create a center that is easily accessible to customers who don’t want to navigate the crowded parking lots and traffic commonplace at malls and power centers.
   "They’d rather come to our centers than get lost in theirs," Mr. Pintinalli said. "We have conveniences in our centers."
   Two years ago, Princeton Real Estate signed leases with Dunkin Donuts and Subway at the Ellsworth Shopping Center in West Windsor, Mr. Henderson said.
   Mr. Henderson said centers such as Ellsworth Shopping Center are magnets for those types of businesses, because the people who patronize them want to get in and out quickly.
   "People go to destinations (such as power centers) because they want to load their shopping carts," Mr. Henderson said. "They don’t want to run in for a sandwich or a cup of coffee."
   Even if an older center has good amenities, business will lag if it is not situated in a prime location, according to the real estate experts.
   "If you don’t have the right location, you’re beating your head against a wall," Mr. Pintinalli said.
   While it may seem like New Jersey is saturated with shopping centers, the state actually is underserved, said Ted Kraus, president of TKO/Real Estate Advisory Group in Mercerville
   Mr. Kraus said many centers now under construction have been in the planning stages for years, but they’ve taken a long time to be approved because of the many regulatory hurdles communities place on developers.
   Regional centers draw from a 10-mile radius, community centers draw from three to five miles away and neighborhood centers draw from within a two-mile radius, according to Mr. Kraus.
   Community and neighborhood centers can prosper, because they are in a less competitive environment than the regional centers and the national retailers they contain, Mr. Kraus said.
   No matter how low the rent or diverse the mix of stores, owners of older centers must continue to maintain and renovate their properties so that customers will want to shop there, Mr. Southwick said.
   "Everyone who’s doing well has done that," Mr. Southwick said. "You have to give it a facelift. The customers demand it."
   Mr. Hill and others believe there is room for older centers to coexist alongside the power centers, as long as they offer what their larger counterparts don’t.
   "Just because people go to the power centers doesn’t mean they won’t be back to the service centers," Mr. Hill said.