South Bend/Mishawaka Market Tour

When you live and spend much of your time in any one area, it can be easy to not really notice the gradual changes are taking place.  Last week, I had a market tour with a client from Chicago that was completely unfamiliar with the South Bend/Mishawaka area.  His Chicago company, of which he was new to, has a Mishawaka office and he was in town looking at a possible relocation for that office. 

I picked him up in Mishawaka for a tour of the area.  We drove down Main St and through the Edison Lakes Corporate Park.  I pointed out the new developments of The Plaza on Day Rd, the new medical buildings, and the new Centier Bank construction and he was genuinely impressed with the look and feel of the area.  I was not surprised by this as this area was developed specifically to make that impression.

We drove down Edison Rd toward South Bend, noting the heavy traffic flow on a busy afternoon as we pulled into a couple retail centers.  I detoured the trip through Eddy St Commons discussing the single family homes, the apartments and the condominiums and office and retail that had all perked up in the past couple of years.  This is obviously a showcase area to bring visitors and one that is impressive to everyone that remembers what that area looked like just a few years ago.

We made the final leg of our trip downtown by way of Angela Dr and Michigan Ave.  It was a beautiful day outside so as we made a quick loop through downtown, there were people walking around, chairs in the plaza, and business people eating lunch on patios.  Street parking was tight but all the activity added to vibrant feel of downtown.

As we concluded our trip and made our way back to Mishawaka, he commented on how impressed he was the area in general and how there were many good options for him to locate his office.  As I thought of our overall trip through his eyes, I too realized how good it really was.  We could drive from the suburbs to downtown and not pass through any dead or dying areas.  There were numerous signs of development and the curb appeal was great the entire drive.  Our area has, just as any mid-size to large city, its areas of blight and legacy industry, but much of that has been greatly improved over a relatively short time.  I guess my take away from the trip was that for the local population it is easy to not notice the big picture of how the two-city area is improving and to get stuck thinking of only the challenges the cities face.  We still have improvements to make in certain areas, but with recent new company announcements and plans to renovate and redesign our streets, I look forward to what a market tour will feel like in another 5 years.

Advertisements

What’s the big deal about Costco?

Image

Ever since the announcement of Costco coming to University Drive in Mishawaka, the area has been a buzz about the store opening.  There have been several mentions of the store in the South Bend Tribune as well as the Market Basket online chats and the topic comes up frequently in conversations.  Mishawaka already has one bulk product membership store in Sam’s Club, so why is Costco creating a stir?

The most notable impact of Costco is the construction of the Capital/Fir Rd connection project.  Costco typically draws shoppers from a 50+ mile radius, making convenient access from the interstate crucial.  The Capital connector will provide a more direct route from I80/90 to University Dr.  The increase traffic flow on these routes will encourage additional retail development.  City Plaza on University Dr has seen moderate success with many tenants opening and closing a relatively short time later.  A new Costco location will not only draw shoppers from the Toll Rd to the east but will also bring shoppers further from the west, shoppers who previously traveled no further than the Super Target.  We should see in the next year or two, an increase in the occupancy of City Plaza and new developments along the corridor.

The question still remains, what makes Costco different from Sam’s Club?  Shoppers new to Costco will find many items in the store packed in the Costco private label, Kirkland’s.  The Kirkland’s label is known for its low price and high quality.  Costco will often change the product supplier under this label if suppliers do not meet Costco’s quality and price standards as demanded by its members.  Shoppers that know this product label and its quality have shown great loyalty toward it.  Costco leverages this loyalty, packing many items under it and keeping the quality consistent.  It has been many years since I shopped at a Costco in Olympia Washington, but I still remember the Kirkland’s fruit and snack mix and look forward to buying it again.  Whenever I travel back to Washington, I always see the label in my sister’s cupboard and am reminded of how I enjoyed shopping at Costco.

It the last year, Sam’s Club has had financial losses and laid off employees while Costco has done quite well.  The difference may be, as pointed out Jillian Berman in the Huffington Post (05/16/2014 8:25 am EDT ), is that Sam’s Club intentionally targets the low income shopper while Costco targets a more affluent clientele.  The Costco shopper is better equipped to weather an economic downturn than those of Sam’s Club.  The Costco membership fee is $55 compared to $45 of Sam’s.  Costco’s are typically located in higher income earning areas, their stores are welcoming and their employees appear happy.  Deserving or not, Walmart has received some bad press in recent years concerning price tactics with their vendors and wages paid to its employees.  Costco has avoided this type of bad publicity and it could be argued has a better brand image in the market place.

All the buzz about Costco coming to Mishawaka is well deserved.  It will not only add jobs and spur retail development in the nearby area, bringing in shoppers from all over Michiana, but it will also provide shoppers and small businesses with new alternatives.  I look forward to having the Kirkland’s dried snack mix in my pantry and enjoying the $1.50 Costco hot dog and pop!

Downtown vs Suburbs

I recently made a change that moved my office from a building in South Bend’s CBD to a building in the Edison Lakes Corporate Park in Mishawaka.  Since that moved, I have been asked on a number of occasions if I miss being downtown and if I enjoy the short and easy commute to the office.  My quick answer is yes to both questions, but as someone that frequently works with businesses that are deciding on their office location, the questions require some thought.

Similar to South Bend, all large and mid-size cities have their downtown and suburban office markets.  South Bend has about 2 million square feet in its downtown with buildings such as the Key Bank Building, 1st Source/Double Tree, Leighton Plaza and several others.  St Joseph County has another 2 million sq ft of office space spread out is all directions with Mishawaka’s Edison Lakes being the dominant suburban market with about half a million sq ft. 

The nationwide trend in the last two decades was a migration from downtown offices to suburban location, led by office workers’ desire to work near home and near where their children went to school.  New suburban office buildings were very attractive locations for businesses offering convenience for their employees, easy parking as well as a high profile location.  The new emerging trend is for a migration back to downtowns, let mostly by generation Y and the millennials’ desire for a network of business and friends.  Cities like Minneapolis have seen a significant move to downtown, consecutive years of 100k sq ft positive absorption in downtown office space. (Star Tribune, May 19, 2012)

The downtown advantages cited by businesses are that these locations offer business networking opportunities and impromptu encounters at lunch, downtown hot spots and after work watering holes.  Staying top of mind with business professionals is a priority to B2B companies and downtown locations make that easier.  In suburban locations, those chance encounter happen much less frequently.  As I go to lunch now, I need to get into my car and drive to a nearby location.  In downtown South Bend, I would frequently walk to Subway or Jimmy Johns and in the process pass and 2 or 3 people I knew.  It may only be a quick hello or exchange of a few pleasantries, but sometimes leads to a deeper conversation or a “Hey, it’s been a while, let’s grab lunch sometime next week.”  That’s hard to beat.  A lunch appointment at Café Navarre also meant seeing and saying hello to half a dozen others in the restaurant.  In my current location, while I know several people in the building I work in, I have yet to run into any of them on my way out the back door and to my car.  Working in a suburban office does force me to be more active in schedule business lunches but I do miss walking out to lunch, coffee, or that after work beverage and just being out there.

On a positive, my commute is easier.  But in this market, if you live in the county, it is only right to say the commute to wherever you work in South Bend/Mishawaka really isn’t a commute at all.  It’s a drive to work that may take 10 minutes for the short drive, 20 minutes for the long one.

Will our market reflect the nationwide trend and see a migration back to downtown?  I believe as downtown continues to improve its residential population, there will be an increase in the entertainment sector and subsequently an improvement the downtown work force.  There have been a couple office building renovations in the past few years and as The Chase Tower and The Commerce Center complete their hopeful renovations and downtown streets are reworked, there will be more opportunities for quality office spaces.  Downtown growth will be a moderate pace as we are still a small community driven by quick and easy commutes.  In the meantime, I will do my best to get out.

World Cup

Happy Friday!  Yesterday the World Cup Brazil kicked off what will be a month of international soccer (football) matches.  I was able get in front of a television for the game at a local local pub, which similar to American Football, is the best way to watch the game.  I sat next to the someone who was not a fan of soccer in anyway, a person that grew up playing and watching the big 3 American sports.  I understand his lack of interest, as I watch very little MLS or international soccer but spend a great deal of time watching and coaching youth travel soccer.  However there is great appreciation for the athletes that play the professional game.

I commented during the game that it is very hard to truly understand how good these players are, playing against the best soccer athletes in the world. For those that watch American football on TV, and then get the opportunity to be on a field during the game and stand next to football players, you immediately get a new perspective as your jaw hangs open at the size, strength and speed of the players.  The same is true for soccer players.  These players are not only incredibly fast with great endurance, they are big, strong and can do things with a soccer ball that would make you think you were seeing some elaborate illusion.

The great thing about watching, playing and coaching soccer that all soccer enthusiasts preach is that it is a players’ game.  Many parents of small soccer players don’t quite understand that unlike other sports, coaches don’t send plays in or draw up game plays and then ask players to go execute.  The players make it up as they go, using their talents and creativity to make split second decisions.  That involves a lot of risks but helps make the game interesting.

One of the great things about soccer is anything can happen during a match.  With final scores often decided by 1 goal, anyone one play can change the outcome.  The first World Cup game saw Brazil score an own goal as the first goal of the tournament.  It did not make the difference in the final outcome, but easily could have.  How many sports can you easily score on yourself?  Life lesson to be learned…take a shot!!  You may not score everyone, but good things usually happen when you take that shot or put the ball in play.

So go out to the pub, grab a pint and catch a few games!

 

Supermarket Size Trends

The trends in supermarkets seems to be going toward smaller stores.  According to Supermarket News, Neil Stern at McMillan Doolittle in Chicago believe 2014 will continue to see significant growth in the small format stores, similar to that of Sprouts.  Sprouts is a farmer’s market style store headquartered in Arizona with stores in 9 states, primarily in the west and south west.

Other companies experiencing growth of the small fresh formats are Fresh Market, Whole Foods, Trader Joes and Fresh Thyme.  Walmart has introduced new smaller stores like WalMart Express and WalMart to Go. The growth in these types of stores comes from changing trends in the way consumers shop.  According to Laurie Demeritt , CEO of The Hartman Group, The next generation of shoppers, the Millennials, are shopping outside their primary stores for specialty items like cheeses, meats and produce.  Generation Y is also shopping at specialty stores much more frequently than their Boomer counterparts.  Both generations shop on average at 9 different stores compared to 6 stores by the older generations.

In our own Michiana market we have seen the entry of Whole Foods, which from a casual observer appears to be doing very well after its first year.  We have also seen small start-ups like the Purple Porch in South Bend, Farmers Market in Granger and organic food stores in Mishawaka and Granger.  The Martin’s Supermarkets have updated many of their stores with the Side Door Deli as well as assortment of organic and international food choices.  Is the time right for Trader Joes or another fresh small format grocer to enter our market?  Or should a local grocer like Martin’s introduce a fresh concept store at the newly designed intersection of Eddy St and SR 23 south of Eddy St Commons?

New Michiana Commercial Real Estate Watch site

Hello friends!  Welcome to the first entry in the commercial real estate blog.  I will use this site to offer thoughts on current market trends, announcements of new businesses or company relocations and other useful pieces of information about commercial real estate.  I welcome your ideas, feedback and suggestions.

Shawn Todd

Commercial Real Estate Broker

Newmark Grubb Cressy & Everett

Edison Lakes