Retail activity showing signs of revival after recession

Brownsville enjoyed a wild commercial development boom in the years leading up to the recession, then everything hit a wall and development became nearly stagnant.

Worse, recently-arrived retailers and restaurants began to disappear. Giants toppled as the shock of the financial crisis reverberated through the economy. Mervyns, which opened its first department store in Brownsville in October 2006, closed that store two years later, pushed into Chapter 11 bankruptcy amid economic turmoil.

Circuit City, Furr’s cafeteria, Hooters, Kay-Bee Toys, Linens-N-Things, Petco and Taco Cabana were among other retailers that came and went in short order, helped along to one degree or another by the financial meltdown.

But there are signs the gloom is lifting, even if just a little, with the arrival of new restaurants and retailers. Las Tiendas Plaza, at the center of the retail hot zone straddling the U.S. Expressway 77/83 at Morrison Road, serves as something of a barometer.

Las Tiendas was once home to Mervyns and retailers Dots, Famous Footwear, and Fashion Bug, three other retailers no longer in Brownsville. After sitting empty for a couple of years, those spaces are filling up again.

Burlington Coat Factory will reopen in the former Mervyns and Office Depot in the old Dots/Famous Footwear/Fashion Bug space this fall. Construction has begun on the interiors of both spaces.

Clay Trozzo is a broker with Houston-based Property Commerce Inc., which developed Las Tiendas in 2006 with Target as its anchor store. The recession was a drag on commercial development and made retailers more cautious, he said, though now retailers are "all making moves for the future."

One big reason they’re doing it at Las Tiendas is the presence of Target. Another, Trozzo said, is the diversity of the mall’s tenants. Finally, the East Morrison Road extension project, which is under way, is a major draw.

"Feldman’s, EyeMart, The Vitamin Shoppe, Burlington and Office Depot — I think they all wanted to be in a power center," Trozzo said. "That Target generates a lot of business."

The Avenue, Mattress Firm, Michael’s, PetSmart and T.J. Maxx are among the mall’s other tenants. The mall is one tenant away from being 100 percent leased, Trozzo said, and he’s got a tenant lined up for the one remaining space. He wouldn’t say who, only that it’s not a restaurant.

Trozzo said he’s planning another 8,000 square feet of retail space next to The Vitamin Shoppe and is in the process of preleasing it. He said he’s also working on "a couple of prospects" to lease the long-vacant Taco Cabana.

Just across the expressway, Morrison Crossing, anchored by Academy Sports and Home Depot, has nearly all its spaces leased. The success of that mall and Las Tiendas underscores the robust nature of the Valley’s retail market compared to other places, Trozzo said.

"It’s a good market," he said. "I think South Texas is one of the strongest markets in the state."

Burlington and Office Depot coming to Morrison Road underscores what everybody knows: Brownsville’s retail center has moved north. Expect the Office Depot and Burlington on Boca Chica Boulevard to pull up stakes eventually, just as Target did at the start of 2010.

The good news is that those properties probably won’t sit idle, according to Mark Barnard of Coastal Realty, which developed Morrison Crossing and has further plans for retail development west of the expressway once West Morrison is extended.

He said Burlington is committed to leasing its Boca Chica location for another five years and will either have to sublease it or "carry it themselves."

The Office Depot building and the former Target building on Boca Chica, meanwhile, have been bought by El Paso-based interests that will probably break them up into multiple spaces rather than trying to bring in another big box retailer, Barnard said. While many investors had planned to wait for banks to foreclose on such properties and then

scoop them up cheap, the expected foreclosure wave never came, though investors are buying up those properties up anyway, he said.

"We aren’t seeing that kind of bloodbath," Barnard said. "It’s the opposite of the residential market When (investors) find an opportunity to buy something that meets their investment critiera they go ahead and buy it, because they need to get their money back to work. From a commercial real estate standpoint, investment dollars from all over the country still like Texas."

He said the fact that Burlington and Office Depot are relocating and not leaving town is a "real positive sign" for local commercial development, which is getting its pulse back after the recession. Barnard calls it "the healing of the market."

While some might prefer a return to the pre-recession years of development gone wild, Barnard said, that scenario unlikely and that moderate development is more sustainable anyway.

"We would rather have steady growth than the skyrocketing growth that we know is going to have come to a screeching halt at some point," he said.