Buy local?

If “location, location, location” drives demand in the real estate market, why are businesses leaving Meadowmont at the same time commercial space at East 54, just across the highway, is filling up? Both are conveniently located on the N.C. 54 corridor, each about the same distance from Chapel Hill and the I-40 exit. Both have a built-in consumer base of financially comfortable residents nearby — with Meadowmont having significantly more residences than East 54. And both were planned and developed by Roger Perry’s East West Partners.

Yet East 54 has seen six businesses open in its commercial space since November and has contracts for three restaurants and a nail salon to open in the next few months. In contrast, Meadowmont’s commercial village center has more “rent me” signs than the Red Light district in Antwerp on a Saturday night.

What’s the difference? Roger Perry sold Meadowmont’s commercial operation to Developers Diversified Realty, an Ohio company that leases property throughout the U.S., Puerto Rico and Brazil. Perry still manages East 54.

Hadley Nixon, who owns Hadley Emerson, an affordable designer fashion boutique, had her choice of opening her store in Meadowmont or East 54. A former investment banker with an MBA, she chose East 54 in order to take advantage of the marketing team that is intent on developing a customer base to support the businesses opening there.

“East West is invested in the success of East 54,” she said, whereas Developers Diversified Realty is an absentee landlord.

Meadowmont has at least eight vacant storefronts totaling well more than 36,000 square feet. Azure Grille and La Russa’s Italian deli are the most recent businesses to close.

East 54 welcomed Kerr Drug from University Mall in November, around the same time that Charles Schwab opened its office, Citrine Salon opened its doors and Deluxe Cleaners opened for business. Fab’rik, selling women’s fashions for under $100, opened in February, followed in short order by Hadley Emerson. Piola Italian restaurant, Saffron Indian restaurant and Neo Nails salon are expected to open in May. Archira Thai and sushi restaurant will open later in the summer.

Some folks may have been affronted that Roger Perry had the gall to replace open fields with “open for business” signs, but he knows how to succeed in the business world. And in this economy especially, the more people who can help businesses succeed, the better.
— Nancy Oates

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8 Comments

  1. Frank

     /  April 6, 2010

    Don’t kid yourself. Meadowmont’s retail area has been a boondoggle from the beginning. I’m sure that outsourced management doesn’t help, but the real reason there are so many “for rent” signs in Meadowmont is that the retail space just doesn’t work. The fake community thing that is Meadowmont and Southern Village works for the people living there, but the retail businesses don’t ever do well because there aren’t enough people living there to keep them alive, and there aren’t enough people who come into these developments to shop. The politicians were hoodwinked into allowing these developments to happen. The retail areas in both of them were never designed to be a profit center for the developers. The developers made their money off of the housing, and threw in the retail stuff just to tell the politicians that they’re building a “community” instead of just a lot of tract housing.

  2. Bob

     /  April 6, 2010

    Nancy, The serious question is what’s happening to rents in Meadowmont vs. the other 54 location. This can be as simple as the cost of the space. DDR may have misjudged the appropriate price. Time will tell if they adjust appropriately……..

  3. Bill

     /  April 6, 2010

    Well said, Bob.

    Buy local = LOL. More libbie nonsense.

  4. Steve

     /  April 6, 2010

    Meadowmont retail spaces were also mostly full when the area first opened up, as I recall.

    When the leases ran out, the places that weren’t making any money closed up shop. The landlord doesn’t have too much to do with it. It has to do with whether there’s a sound business model on which to base the enterprise.

    I remember when the development first opened up. I was walking around poking my head in the shops and commenting to my wife that I didn’t see how many of the Meadowmont shops would stay afloat for any appreciable time. I couldn’t work out the profit numbers in my head, and for most of the new places across the street, I expect the same results.

    Chapel Hill is, if anything, over-served with unsustainable retail. People go ga-ga over the local economic demographics and mistake them for opportunity; apart from a few successes, retail turnover is very high, and even absent the effects of the down economy these days, vacancies are too.

  5. WJ

     /  April 7, 2010

    Agree with Bob.

    Wouldn’t you think that the difference (if any) in rental cost might be a factor in the occupancy rates between the two locations?

    Maybe there is no real difference in rents and the marketing team you mentioned is a key factor. But it would have been useful information to know.

  6. Bob

     /  April 7, 2010

    Frank, Let me offer an alternative interpretation. Politicians weren’t hoodwinked, but extracted concessions from developers in the form of their preferred model of land use. The problem isn’t the developer, it is that politicians don’t have the knowledge, expertise, or willingness to set aside their personal preferences when it comes to evaluating these development plans. I agree that these businesses fail because the business model is suspect. The question to ask is why those spaces are available. I believe that the answer lies in the demands of politicians, not in the folly of developers. The town councils here cannot repeal economics…….they ought to stop trying to do so.

  7. Frank

     /  April 7, 2010

    Bob, I see where you’re coming from. The problem is that the planning boards and other gov’t groups simply don’t understand the somewhat complicated retail market. I didn’t pay close attention to the negotiations for either one of these fake “communities”, but I would have to imagine that at some point the developers would or should tell the politicians, “Look, we know you’d like to see retail in there, but based on our experience, it just won’t work.” I guess that I lay the blame at the feet of both the developers and the politicians. There’s no reason why either of them could have approached the town’s economic development people and asked them to do an informal survey as to demand for that particular kind of retail.

    At this point, I think that the town needs to allow these areas to be re-developed. Neither area is particularly successful, and when Weaver St. Market finally closes their ill-conceived Southern Village location, both retail areas will just end up as vacant eyesores.

  8. Geoff Green

     /  April 7, 2010

    Couple of thoughts: First, I’ve heard the same complaints regarding the out-of-town landlord as Nancy implies. They don’t seem to have a great sense of how to make a successful mix of retail.

    Second, one of the problems Frank points out is that not enough non-residents come to shop in Meadowmont (or Southern Village, although I’m not as familiar with its travails). A part of that is because the commercial area simply isn’t large enough to make it a destination stop, where shoppers can get more than one thing done at a time. However, I’m not sure whether a mixed-use development with a larger commercial component would get approval from town council and town residents.

    Third, not all is grim in Meadowmont. According to one of the local DDR folk, new restaurants are planned to open by around August, if all goes well. They include a Five Guys Burgers & Fries and some kind of sushi place.

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