Janesville's outlots are now in: Commercial real estate market improving
JANESVILLE—Janesville's commercial real estate market is improving, driven in large part by a retail sector punctuated with outlot growth along the Milton Avenue corridor.
Local real estate brokers said the retail sector is definitely leading the way in the slow, incremental growth in the larger commercial real estate sector.
For evidence, look no farther than Milton Avenue in Janesville, where construction activity is up and plans have been laid for even more:
-- CVS pharmacy left the Creston Park Mall and will move into a new building in the corner of the parking lot for Big Lots and the recently opened Planet Fitness.
-- The new Dunkin' Donuts strip center just up Milton Avenue is filled with tenants and customers.
-- A former auto dealership is no longer the seasonal home of holiday stores or political candidates. Instead, it's the new location for a Salvation Army Family Store & Donation Center.
-- Two strip centers in the parking lot of the former Walmart are now filled, and another is planned and nearly signed with tenants across highways 14 and 26 in the Kmart parking lot.
-- A developer demolished the former Arby's restaurant, and construction of a new US Cellular store is blazing along.
-- Panda Express will soon start construction on a new restaurant across Morse Street from the relocated Arby's in front of Menards.
-- Three other strip centers also are in the works for the same area: one behind Panda Express, one behind Target and one to the north of the new Arby's in front of Menards.
“Traditionally, we have not had a lot of activity with out-parcel development, but we're seeing a real shift to that,” said Gale Price, Janesville's manager of building and development services. “They're smaller buildings because that's what the market will support.
“Some retailers don't want to be at the mall. They want people to be able to see them and get to them, and the developers are seeing that and bringing these projects together.”
Price said the city changed its thinking on parking more than 10 years ago when it allowed larger retail centers to reduce the number of spaces required by city codes.
“We were over-parked, especially for shopping,” Price said. “We decided it was not our responsibility to require the bigger stores to have enough parking for a handful of big shopping days, such as Black Friday.”
With a recovering economy, smaller retailers are investing in location and exposure, said James Otterstein, Rock County's economic development manager.
“Years ago, everything was about a mall, a plaza or a center, but retailers now want smaller footprints with reduced overhead that give people a quicker in and out,” he said.
Otterstein said Milwaukee Road in Beloit is experiencing the same phenomenon as Milton Avenue in Janesville.
Barry Badertscher owns Badertscher Commercial Real Estate in Janesville. He recently handled the brokerage of both the Planet Fitness and the CVS projects and said Milton Avenue is jumping.
“If you're looking at retail on Milton Avenue, you're probably looking at building, particularly if you're looking for 1,500 or 2,000 square feet of space or even a little bigger,” he said. “These places want to be as close to the action as possible, and that's in these strip centers and outlots.
“They don't need big stores, and they want people to be able to get in and get out quickly.”
Mandy Waller-Witt, a broker for Coldwell Banker Commercial McGuire Mears & Associates, also has been involved in the uptick of the local retail market.
“What's hot right now is the 1,200-square-foot to 3,000-square-foot property,” she said. “Typically, these are outlots or strip centers and involve health care, cellular phones or casual fast food.”
Among other projects, Witt has been involved in the Panda Express deal as well as the pending outlot developments in the Kmart parking lot and near Menards.
While Witt said it's too early to identify the tenants for the Menards area, she said Qdoba and Heartland Dental have signed leases for two of the three spots in the Kmart outlot project.
“The Interstate traffic is a big factor for Janesville, and we're still a community that draws a lot of people from around the region,” she said. “There's a lot of positive news in the community in other economic sectors.
“There's definitely a vibrancy, and it draws people to the community.”
Castaways or prospects?
New construction sometimes leaves holes, particularly when an existing company moves into a new location and a backfill tenant is not immediately available.
An example is the former Walgreens at the Five Points intersection in downtown Janesville.
For a variety of reasons, that parcel has been vacant since 2010 when Walgreens moved into a new building on West Court Street.
Others have been vacant even longer, and brokers and economic development officials said they likely would sit empty because of their locations, physical conditions or a variety of other factors.
Witt and Badertscher said tenants are needed for the Village Plaza adjacent to Shopko and in the Creston Park Mall with the departures of Dean Clinic and CVS, respectively.
“Some of the bigger locations are sitting empty,” Witt said.
“They are a challenge right now,” Badertscher added.
Otterstein said that while the local retail and commercial market has increased in the last few years, the office market has been softer, particularly in Janesville.
“While it's important to have a diversified portfolio of space, that space must meet the expectations of prospective tenants,” he said. “Property variables often include cost, access and visibility, functionality and any possible synergies that exist from co-locations.”
Office activity is definitely slower than in the retail sector, Badertscher and Witt agreed.
“In the office sector, a lot of what's happening is just businesses changing addresses,” Badertscher said. “Some of that leaves vacancies behind, and some of it leaves vacancies that get backfilled by other businesses.
“While there's been some growth in the office sector, I think Janesville is always going to struggle with that. Other than movement among attorneys, accountants, insurance companies and others, Janesville really isn't a big office town.”