Hall Road, other shopping centers face changing landscape amid COVID-19
At 10.5 miles, the stretch of M-59/Hall Road that runs east to I-94 in Macomb County produces one of the most formidable retail hot spots in the region. So what happens when half of the 90,000 to 100,000 cars that traverse it daily stay in their driveways or garages?
But Hall Road serves only as a snapshot — albeit an outsized one — for the area’s retail sector amid a once-in-a-century public health pandemic that has killed more than 2,000 across the state as of April 16 and arrested the state’s economy. The same can likely be said for busy stretches like Big Beaver Road through Troy and Ford Road running through Canton Township, among others.
“The reality right now is I think relationships matter most in all this, tenant-landlord relationships. I think everyone needs to understand the situation everyone is in before everyone starts throwing the baby out with the bathwater.”
From owners to landlords to bankers, there are no sacred cows, and no sacred trunklines. None are spared.
Just last week, the parent company of chain restaurants Bravo! Cucina Italiana and Brio Tuscan Grille — FoodFirst Global Restaurants — filed for Chapter 11 bankruptcy; Brio has a location at The Mall at Partridge Creek in Clinton Township, Restaurant Business reported. Justin Winslow, president and CEO of the Michigan Restaurant and Lodging Association, has previously estimated that as many as one-third of the state’s more than 16,000 restaurants may fall victim to the pandemic.
“For some retailers that were hanging on by the skin of their teeth, this could be a knockout punch for them,” said Joseph Sowerby, partner for Mt. Clemens-based commercial real estate firm Anton, Sowerby & Associates.
Tenants that have outposts along the stretch have asked for rent forgiveness and, in some cases, received it, like at Lakeside Mall.
They populate a dense retail corridor with millions of square feet across its 10.5 miles.
According to CoStar Group Inc., a Washington, D.C.-based real estate information service, Macomb County as a whole has two of the three most valuable retail markets in the region — eastern Macomb and western Macomb, both valued at $3.1 billion for $6.2 billion in value. Only the southern I-275 corridor matches it ($3.1 billion); St. Clair and Lapeer counties combined total $2.4 billion while Washtenaw County west of U.S.-23 is $2.4 billion.
Strictly along Hall Road at its western edge in Utica to the west at I-94, there is at least 5.1 million square feet of retail space with a 4.1 percent vacancy rate and rents at $24.07 per square foot, CoStar says. Lakeside Mall is 1.55 million square feet, while The Mall at Partridge Creek is 650,000, totaling 2.2 million. By comparison, Twelve Oaks Mall in Novi is 1.5 million square feet and Somerset Mall in Troy is 1.45 million square feet.
In the second quarter, vacancy along Hall Road’s retail space is expected to bump slightly to 4.4 percent.
Much of the square footage is shuttered under Gov. Gretchen Whitmer’s stay-at-home order limiting business activity in the state in an effort to stymie the virus’ spread across the state’s 83 counties. How Hall Road and other major retail corridors reopen is an open-ended question.
“I think it’s going to take time to get back to normalcy while keeping our social distancing when meeting for a drink or coffee,” said Louis Ciotti, an associate broker with Farmington Hills-based Landmark Commercial Real Estate specializing in Macomb’s dense retail footprint. “There will be apprehension while doing so.”
The closings trickle up to the banks. With revenue depleted or nonexistent, tenants have a tough time paying rent. When that happens, landlords have a difficult time making debt service payments on their loans.
There are no fewer than three dozen commercial mortgage-backed securities loans along or near the Hall Road corridor that could be impacted by decreased retail and vehicular traffic, according to data provided by Trepp LLC, a New York City-based company that tracks CMBS debt. In Macomb County alone, there is $6.57 billion in CMBS debt across more than 200 loans across all property types, ranging from retail to multifamily, industrial to office, hotel to storage.
CMBS debt that is secured by hotels and retail is generally expected to be the most at risk. In recent weeks across the region, hotels have hovered between 20 and 25 percent occupancy and pulled in just a quarter of the revenue they did before the coronavirus pandemic struck, according to STR, a hotel-industry analysis firm with its North American headquarters in Tennessee.
“It’s definitely going to be a process, and it’s not coming back overnight,” said Ophir Sternberg, the new owner of Lakeside Mall in Sterling Heights and head of Miami-based Out of the Box Ventures LLC, a subsidiary of Lionheart Capital LLC.
“It’s a strong retail corridor and will stay strong.”
Posted By: Crain’s Detroit Business on April 19, 2020. For more information, please click here to read the source article.
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