LaCenterra wants an encore
Lifestyle center near Katy is likely to expand with its affluent area
Five years ago, Woody Mann was having trouble convincing national chains that his planned lifestyle center LaCenterra at Cinco Ranch would be a good spot for retail.
There was a national perception that Katy was a sleepy small town, he said.
“We put ’em in a helicopter and gave a 30-minute tour of Katy at $4,000 a pop,” he said, referring to the rental fee for a chopper. Even without the aerial view, Mann could show some compelling stats.
For example, the projected 2011 average household income within a three-mile radius of LaCenterra is $130,000. And in 2009 Business Week named Katy the nation’s No. 2 “boom town, ” behind only Summerlin South, near Las Vegas.
Mann opened LaCenterra in 2007 in Cinco Ranch, a planned community near Katy. The all-brick mixed-use lifestyle center, known for a landmark clock tower, is 88 percent leased for retail and 85 percent either leased or committed for office space, Mann said.
Now, he is planning a phase 2 for the center, but he’s not sure exactly what to do with it.
The current market doesn’t allow a developer much room for error. Many national retailers aren’t expanding and the economy is sluggish.
Originally Mann envisioned phase 2 as having retail on street level and 250 residential units above it. Now, he is wondering if it would be better to put office space on the second level, as he did in phase 1. He still hasn’t decided whether to aim for mid-range or high-end retail. He has hired a marketing research group to gauge what the Cinco Ranch community wants.
Phase 1 of LaCenterra is 260,000 square feet — 170,000 square feet for retail and 90,000 for office. Tenants include Ann Taylor Loft, Chico’s, Eddie Bauer, J. Jill, Talbots and Luke’s Locker. Restaurants include Perry’s Steakhouse & Grille, Kenzo Sushi Bistro and Baker St. Pub & Grill. Las Alamedas Mexican restaurant is scheduled to open in summer.
The $70 million project did not cut corners, Mann said. The exterior is all brick and natural stone and contains water features. LaCenterra’s clock tower, which has become a community identifier, he said, was expensive to build.
Typically, a lifestyle center is an open-air shopping center in an affluent neighborhood and includes amenities such as courtyards and landscaping.
LaCenterra uses its public spaces to hold community events for mothers, teachers and other groups and has a farmers’ market on Saturdays.
Originally, Mann planned a conventional grocery-anchored shopping center, but Newland Communities, developers of Cinco Ranch, encouraged him to raise the bar, he said.
Ted Nelson, president of Newland Communities’ central region, said LaCenterra, along with Target and a library — all of which are in Cinco Ranch’s business district — are “tremendously important” in the overall success of Cinco Ranch.
Asked what he’d like in LaCenterra’s phase 2, he mentioned a specialty grocer and rental residences. “My gut tells me that there’s probably a market out there for apartments,” he said.
“All kinds of combinations” are possible, Nelson said, including retail and professional office space on street level and apartments on the second level.
Lately, many national retailers have been shying away from lifestyle centers, said Jeff Green, the president of retail consultants Jeff Green Partners in Mill Valley, Calif.
When national chains start expanding again, they’ll probably first look at “the better malls they’re not already in,” he said. Green, who has visited LaCenterra, speculated that phase 2 might appeal more to locally owned retailers than national chains.
LaCenterra benefits from its proximity to high-income residents and has a “captive market” in that not much other retail is close by, he said. “But the question is: Is the density there?”
Offering another view, Scott Shillings, president of Riverway Retail, said LaCenterra has good access to other Houston neighborhoods by way of Interstate 10, the Westpark Tollway and Grand Parkway. Houston-based Riverway works with retailers in finding locations.
Ed Wulfe, president of Wulfe & Co., believes LaCenterra has appeal for national retailers because it is “well-developed and well-leased.”
A lot depends on market penetration, and whether a chain feels the need to establish a presence in a particular area, Wulfe said.
Edgar Carlson, the co-owner of Houston-based Hospitality USA, which owns Baker St. Pub & Grill and 21 other pubs in Texas, Colorado and Oklahoma, said his Baker St. at LaCenterra is one of the company’s best performers.
“The Katy area is so underserved,” Carlson said. “Much like it is in the Woodlands, once you’re back in your neighborhood, you don’t want to get back in traffic.”
Debbie Schultz, owner of the family-owned Get Personal Katy at LaCenterra, a retailer of luggage, accessories and women’s apparel, also is pleased with the location. She opened three years ago in 1,100 square feet and has expanded to almost 3,000 square feet.
Katy is still growing but not at the same pace. From 2000 to 2008 the population of the Katy area grew at 5 percent to 7 percent a year, compared with projected annual growth of 3 percent to 5 percent between 2009 and 2014, according to the Katy Area Economic Development Council.
“But it’s still significant,” said Lance LaCour, president and CEO of the council. Cinco Ranch, which is outside the city limits, has 25,000 residents. The city of Katy has 14,500 residents and 240,000 people live within the Katy Independent School District,which also serves students in Houston and Fulshear.
“A lot of companies are locating here, partly because of our proximity to the Energy Corridor,” LaCour said, and Cinco Ranch, which opened in the 1980s, had its best year ever last year.
Shilling said the area is growing because of its schools, solid employment picture and quality of life.
Mann, who operates under the name Vista Equities Group, previously developed smaller neighborhood centers.