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AUSTIN, TX-With competitors on the sidelines making bets in their favor, Endeavor Real Estate Group LLC has taken the next step in carving out a new Central Texas trade area. The mixed-use development will add 1.6 million sf of retail space with more than one mile of Interstate 35 frontage in South Austin.

“The sheer size and the opportunity that we have to create a destination shopping, living and dining area is what really makes this unique for us,” Chris Ellis, principal with Austin-based Endeavor, tells GSR. “At full build-out, it will be the largest shopping center in the City of Austin.” Endeavor began the project three years ago, buying 35 acres and placing dibs on another 190 at the interstate’s intersection with Slaughter Lane, just 10 miles south of the downtown. “We decided to go ahead and place a bigger bet down here and purchase the whole 425 acres,” he says about the recent acquisition. “We knew there was demand for retailers to be in this trade area.”

The first phase to Southpark Meadows, a 257,926-sf, 92%-leased center anchored by a 206,601-sf Wal-Mart and 22,304-sf PetsMart, opened in June. It’s just been sold for $21 million to Oakbrook, IL-based Inland Western Retail REIT Inc. Now, Endeavor’s off and running on a $200-million, 850,000-sf second and third phase of retail development, Ellis says.

Though Endeavor has the connections to partner just like it’s doing in North Austin on the 1.3-million-sf Domain with the Indianapolis-based Simon Property Group Inc., Ellis says the plan is to solo on Southpark Meadows until it’s developed. At completion, the principals will decide whether to take on a partner, sell in its entirety or place permanent financing for a long-time hold.

Ellis says Southpark Meadows’ second phase broke ground with 270,000 sf of preleased space and five pad sites that are ground leased or under contract. Anchor leases average 35,000 sf in 10- and 15-year terms. The 550,000-sf second phase will deliver in May 2006 and the remaining 300,000 sf will roll out about six months later.

Ellis says full build-out of the mixed-use development is projected to take three to five years. “We expect the retail to go a lot quicker due to the deals we’ve signed and the leases in the pipeline,” he adds. Small shop space is fetching $28 per sf to $32 per sf. Endeavor’s Bill Osherow and Brian Lent are preleasing the space.

The first residential product will come on line in mid-2006, according to Ellis. Southpark Meadows, the replacement vision for a closed Woodstock-style amphitheater, will include 100 to 200 townhouses, 400 to 500 single-family lots on 85 acres and 600 to 700 apartment units. By year’s end or early 2006, Lennar Corp. of Miami will break ground on the single-family lot development while San Diego-based Fairfield Residential LLC will dig into the multifamily component. Talks also are under way for an entertainment component that could add a theater to the Southpark Meadows’ stage. Twenty acres have been reserved for future office and medical office development.

“South Austin has been overlooked,” Ellis explains. “The numbers are pretty eye-opening.” Despite 40% to 50% of the population living south of the Colorado River, most national retailers had just one store in the trade area versus “four and five” to the north of the demarcation line. Southpark Meadows’ line-up already includes Ross Dress for Less, Circuit City, Bed Bath & Beyond, Office Max, Hobby Lobby, Ashley Furniture, Rooms to Go, TGI Friday’s, Johnny Carino’s, Waterloo Ice House, Mama Fu’s and Chick-fil-A. Endeavor’s also talking with J.C. Penney Co. about taking a spot for a freestanding unit.

“Like the Forum that anchors Northeast San Antonio, this center will anchor the South Austin trade area,” Ellis says.

Central Texas retail development historically has stretched to the north and outside the Austin city limits to get away from costly and time-consuming barriers to entry, specifically permitting hurdles. As a result, Scott Freid, president in Austin for the Dallas-based Weitzman Group, says “there’s absolutely a need for tenants in that area. There was always a lot of land in the south, but never the right tenants. Endeavor’s creating a new trade area.”

By Weitzman’s count, the Austin market has 29 million sf of 95%-leased retail space. Though the inventory’s overshadowed by the state’s larger metros, Austin’s occupancy is the highest in the state, according to researchers.

With its under-served reputation as the drawing card, Austin now is in the midst of a record-breaking retail development year. There are 4.06 million sf of projects that have broken ground or soon will be, according to stats collated for GSR by Dean Janeff and Sherry Naquin Sanchez, retail specialists with NAI Commercial Industrial Properties Co. in Austin. Of the under-construction space, 3.4 million sf will deliver in 2006. The norm has been 600,000 sf to 800,000 sf annually for 11 years running, Janeff says.

Besides Southpark Meadows, the Austin development docket includes the 535,000-sf Shops at Galleria, a late 2005 delivery; 550,000-sf Round Rock Outlets, fall 2006; 800,000-sf Domain and its sister, 458,000-sf Shops at Arbor Walk, fall 2006; and 125,000-sf shop component to the mixed-use Triangle. Nearby suburban projects include Simon’s 670,000-sf Wolf Ranch in Georgetown and the one-million-sf Hill Country Galleria, which just cleared another development hurdle. Dallas-based Lincoln Property Co., Phoenix-headquartered Opus West Corp. and local developer Chris Milam last week got clearance for $21 million in sales tax rebates for the retail, residential, office and restaurant proposal, which includes a 400-seat amphitheater, in the Village of Bee Cave. If the plan stays on track, ground will break in the fall and keys will begin to turn in spring 2007.

Inside or outside the city limits, Austin’s barriers to entry have eased, Sanchez says, citing a recent decision by the Lower Colorado River Authority to relax regulations. “A lot of people picked up land in anticipation of that,” she says about the LCRA decision.

Despite the record-breaking starts, Austin’s retail occupancy isn’t expected to crater. Not only does the city historically fill all that it builds, but only a minimal amount of the space is spec, according to Janeff and Sanchez. NAI, tracking 19 million sf of inventory, pegs occupancy at 93.89% at yearend 2004. The market’s occupancy peaked in 2000 when it hit 95.77% and its lowest ebb was 1993 with 85.73%.

“I think Southpark Meadows is going to be a success because of the amount of single-family subdivisions that are there now,” Janeff says. Its closest competitor is land around Cabela’s, situated five miles to the south. A Salt Lake City developer recently bought a large tract neighboring Cabela’s to build retail, hotel and theater.

Endeavor has secured many of the same names that are in its other centers and set a hook for newcomers. “The retailers have made a decision to locate at this intersection instead of deciding to go to Kyle [10 miles south] or Buda [Cabela's turf] because there’s a much larger population base here,” Ellis stresses. Traffic studies show 125,000 vehicles pass the site daily on the interstate.

Southpark Meadows’ developers intend to preserve the large stand of Live Oak trees that once provided shade for concertgoers. They also are planning a five-acre central park–the Grove at Southpark Meadows–with fountains, playscape, outdoor seating and 40,000 sf of restaurant space. At least four large Live Oak trees in the path of construction will be relocated.

Dallas-based Hodges & Associates is the land planner and architect of the Texas Hill Country-style development, designed with “green building” extras, 17-acre pond and jogging trails. The Austin firms of White Construction Co. and Coleman & Associates are the general contractor and landscape architect, respectively.

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