Shopping mall makeovers

While plenty of attention has focused on new retail space in the Truckee Meadows, a wave of renovation projects quietly sweeps through older centers.

The facelifts represent an effort by property owners to keep their centers fresh and competitive with the newly constructed retail center in the region.

The trend gets an big boost from the flow of capital into northern Nevada real estate from elsewhere in the country notably California.

In recent months, the centers that have undertaken renovation projects include:

* Silver State Plaza on North McCarran in Sparks.

* The Moana West Annex at Lakeside and Moana.

* Reno Town Mall at South Virginia and Peckham.

* The Ironhorse Shopping Center on East Prater Way in Sparks.

*The Baring West center near McCarran Boulevard on Baring Boulevard in Sparks.

Shoppers Square at Plumb and South Virginia, meanwhile, has completed the second phase of a major expansion and renovation project.

Work began early this year on a significant reconstruction of Sierra Marketplace Shopping Center at Moana and South Virginia, which will be converted into an entertainment and dining destination and renamed "The Village." The initial impetus for much of the work comes from the competition presented by newly constructed centers.

"This allows you to keep your competitive position in the marketplace," says Roxanne Stevenson, who specializes in retail properties as vice president of Grubb & Ellis Nevada Commercial Group.

"If you don't do it, you may lose some of your tenants to the new centers."

Mark Keysers, an associate in retail properties with Colliers International in Reno, says worries about migration of tenants from older space aren't just philosophical.

Some retailers have in fact packed and moved to newer and shinier space.

The renovation projects have gotten a boost, too, from national economic conditions - low interest rates, a stock market just beginning to regain its luster.

Chris Waizmann, a retail specialist with Trammell Crow, says capital flows into northern Nevada real estate continue to be strong as investors look for returns that outstrip those they can find in the equities markets.

"Reno continues to be a very attractive market for out-of-state investors," Waizmann says.

The strategy for some of those investors who buy retail properties, he says, has been similar to folks who buy an old house, fix it up, and sell it for a tidy profit.

With retail properties, owners hope that a renovation project will pay off either in higher rents or improved occupancy or, ideally, both.

The strategy has made even more sense as interest rates continue to bump along near historic lows.

"Money is cheap right now.

It gives owners a chance to expand," says Waizmann.

And in some cases, Stevenson says, investors are putting money into renovation of retail space simply because they can't find other real estate investments in the market at a reasonable price.

If the strategy is to work, however, costs can't spiral out of control.

Keysers says renovation costs may be modest installation of a new exterior face and new signage but some older centers present expensive construction challenges.

Property owners don't have any guarantees, either, that a renovation project will boost occupancies or rent.

Still, it's worked out that way lately.

Moana West Annex, for instance, had four vacancies before its new Portlandbased owners invested $250,000 on a facelift last year.

Today, Keyzers said, only one space remains available.

Reno Town Mall, another center that's wrapping up a renovation project, had about 50,000 square feet of vacant space after Truckee Meadows Community College moved out.

Today, it's essentially full after a major renovation that saw expansion of Burlington Coat Factory into much of the vacant space and new leasing activity.

Shoppers Square, one of the city's pioneering shopping centers, is close to completely leased after adding a 10,000- square-foot cluster of shops, expanding the Marshall's store in the center by another 10,000 square feet and undertaking other improvements throughout the property.

Owners who undertake renovation projects also try to close the rental gap between new and old space.

Late last year, Keysers said, monthly lease rents in older centers with anchor stores ran about $1.41 a square foot.

In centers without anchors, the rate was about $1.30.

But in new centers, shop space is leasing for as much as $2.50 a square foot in centers with good visibility from the street at high-traffic intersections.

Perhaps the most ambitious project is that undertaken by the owners of Sierra Marketplace Shopping Center next to the Atlantis Casino Resort.

The center, which is owned by executives of the parent company of the Atlantis, will be converted from a traditional neighborhood center anchored by a Smith's grocery into cluster of restaurants, boutiques and entertainment venues.

Ben Farahi, managing partner of the shopping center and co-chairman of The Atlantis, has said the owners want the center to draw from nearby hotel properties as well as the convention center.

The renovation so far has included demolition of a 17,000-square-foot building that previously houses a Winan's Furniture store, and work has begun on installation of a mid-block traffic light on South Virginia.