The retail market in Jackson can be broadly defined as consisting of four areas: Town Square, Downtown Local Retail, Highway, and Strip Center. The market standard in Jackson is to quote retail rents on a NNN (triple net) basis, with the rental figures given as an annual amount per square foot. NNN expenses currently range from $3.00 to $7.00 per square foot per year, depending on the age and efficiency of the building.
The Town Square submarket consists of those retail properties lining the Town Square, and those within a block of the Square along either Broadway, Cache Street, Center Street, or Deloney. These four streets bracket the actual square. The retail uses in this submarket are primarily oriented toward the tourist trade, with a strong secondary emphasis on fine art galleries. Jackson is the southern gateway city for Grand Teton and Yellowstone National Parks, which receive nearly three million visitors each year, most of whom come in the summer months. Geographically, this is not a large area, consisting of a few blocks of retailers. These retailers typically achieve gross sales between $350 and $450 per square foot. National retailers in this submarket include Eddie Bauer, Pendleton’s, Coldwater Creek, Haagen-Dazs, and Ripley’s Believe It Or Not. In the past year, three national retailers have exited the market: The Gap, Sunglass Hut, and Chicos FAS. The Gap and Sunglass Hut lost their leases to other, local tenants, while Chico’s chose not to renew their lease when it expired in March 2009. Rents within this submarket are directly related to proximity to the actual square.
In the Summer of 2007, and into early 2008, properties directly on the square could command rents from $65 to $70 per square foot per year, plus expenses. Rents decline as one moves off the square, tapering down to $25 per square foot as little as one block away. Historically, there was no vacancy within the Town Square submarket. The only retail vacancies historically observed within this submarket were caused by frictional vacancy, being the short time after one tenant has vacated and the space is being remodeled to accept the next. Generally, the incoming tenant would pay rent during this period, as demand for space on the square was strong. In October 2008, the financial markets in the United States largely collapsed, and credit became extremely difficult to obtain. The stock market plunged, and consumer confidence followed. Tourism declined noticeably in Jackson, as evidenced by declines in hotel occupancy rates and sales tax collections. For the first quarter of 2009, retailers are reporting declines in business of 25% to 40% over the same period of the 2008.
Several retailers have closed their businesses on the Town Square, and most of these spaces remain vacant as of the appraisal date. As of the appraisal date, there are multiple vacancies on the Square, being spaces previously occupied by Meyer-Milagro Gallery (2,100 sf), Earth & Vine (6,350 sf), Chico’s (1,600 sf), Queenie & Company (1,900 sf), Snake River Spa (2,545 sf), and Snake River Sporting Club (5,300 sf). In addition, there are two new buildings just completing construction with large vacant retail units. The entire ground floor of 30 South King Street is available (1,875 and 2,793 sf units), and the entire ground floor (4,000 and 5,277 sf) of the building at 172 Center Street (directly across from the subject property) are available. Other retailers on the Square either have, or are in the process of, renegotiating their rents downward with their landlords.
Downtown Local Retail
The Downtown Local Retail submarket encompasses all of the retail area within downtown, but outside the heavily trafficked pedestrian corridors of the Town Square itself. Retailers in this submarket are almost exclusively local in nature, and generally cater to the residents of Jackson. Exceptions would be the restaurants found here, which also depend to a degree on the tourist trade in the summers. Rental rates in the submarket range from $18 to $25 per square foot per year, plus expenses. Vacancy is below 5%, and has remained at this level for the last decade.
No new development is proposed at this time, and only one new project has been built in the past five years. This project will be completed by the Summer 2009 and is located on the corner of Pearl Avenue and Jackson Street. The project is a three story mixed use building with office and retail on the ground floor, and residential condominiums on the upper two floors. The design is contemporary and presales were strong when the project was launched in late 2007. Since then, market prices have declined dramatically for retail, office and residential, and it is uncertain if the contracts for the units will close when the project receives its certificate of occupancy, or if the buyers will choose to forfeit their deposits. Another development was proposed in this area, on the corner of Glenwood and Simpson. The development received all of its planning approvals, but failed to get financing when the credit markets collapsed in October 2008. The development would have been a three story mixed use building with retail on the ground floor and residential condominiums on the upper floors.
The Highway submarket is a catch-all designation, encompassing all of those retailers located along West Broadway, South Broadway, and South Highway 89, all of which are the same road, which changes names as it traverses town to the west and turns south. Rental rates along this corridor can vary widely, based on the age and design of the building, accessibility of the highway, availability of parking, and size of the space. Rents range from $18 to $24 per square foot. Excluding the two newest developments (Hillside and Eagle Village), rents range from $18 to $20 per square foot, plus NNN charges. Prior to the recent collapse in demand for retail space, rents at Hillside and Eagle Village ranged from $24 to $28 per square foot, plus NNN charges. No units have come up for lease in the past six months, so the impact of the recession is harder to determine.
Hillside, completed in 2003, is located on the north side of West Broadway at Scott Lane and is a mixed use development on three levels with approximately 25,000 square feet of retail. Most of this development is owner-occupied, as the building was designed and sold as commercial condominium units. Eagle Village is a three story mixed use building within the Smith’s Grocery Plaza at South Highway 89 and High School Road and was completed in 2004. Eagle Village contains approximately 21,000 square feet of retail on the ground floor. Both of these projects are now over 95% occupied. Occupancy within the entire submarket is estimated at 95% as well. One other notable property in this submarket is the 2004 redevelopment of a former 46,000 square foot Albertson’s grocery store into a power center occupied by Dollar Tree, Staples, and Hoback Sports.
Excluding the Eagle Village mixed use center anchored by the Smith’s Grocery, there are four strip shopping centers in Jackson, all located in West Jackson or on the south edge of town. They are Grand Teton Plaza, Powderhorn Mall, Kmart Plaza, and Movieworks Plaza. All of these centers cater to the local resident population of Jackson and the surrounding areas. National tenants include Kmart, Sears, and Radio Shack. Rents within these centers range from $18 to $20 per square foot, NNN, and occupancy rates have remained above 95% for the past five years.
Retail occupancy rates in Jackson have held steady between 95% and 100% for the past five years. The highest rents and lowest vacancy was traditionally found in the Town Square submarket, which caters to the extremely high tourist traffic in the summers, but this submarket has suffered the greatest declines in both rental rates and occupancy in the past two quarters. There is little vacant land for new development within the Town of Jackson, and rental rates within the older centers and buildings are generally high enough to prevent demolition and redevelopment, as rents in the newer buildings do not command a great enough premium to justify the redevelopment, based on the prevailing land prices. Although rents have increased apace with the general level of inflation over the past five years, demand for retail goods is down sharply and rents are expected to decline through 2009. The Town Square submarket will suffer the greatest declines, being most dependent upon a tourist trade which may not recover in 2009.