The construction of the new Office Max, the Banco Popular building, the seven-theater Cinemaplex, yet another Al Cohen's mall on the East End and a proposed commercial center in Mafolie all indicate a need for more commercial development on the island, right?
Some people wonder.
They question the need for this amount of development when commercial space is already available in areas like Wheatley Center, Fort Mylner Shopping Center and Four Winds Plaza. And they fear that a rapidly growing supply of commercial space is outweighting a not-so-quickly growing demand.
While the island's commercial property managers generally agree there is certainly a surplus and certain tenants with special needs have to build, they don't necessarily agree on any single reason why.
"My personal feeling is that throughout the years more and more has been built and the island cannot support the amount of availability," said Maurice Wheatley, general manager of Wheatley Center.
"I think the demand for quality commercial space hasn't kept pace with the availability," which has either " leveled off or decreased," Wheatley said.
"Things don't look that good for the market," he added.
Wheatley said Hurricane Marilyn was a major factor in the weak commercial market. After Marilyn, a lot of people — including many entrepreneurs — left the territory. Although this was not the case with Wheatley Center tenants, these circumstances were all inter-related, Wheatley said.
Four spaces are now available in Wheatley Center. One has been vacant since June 1998. The most recent became vacant in December. But Al Cohen, of Al Cohen's Plaza, is optimistic.
"I think people got a little scared after the hurricanes but I feel that is now subsiding and they are more willing to develop," Cohen said.
"The hurricanes didn't help us," he said, but added, "I think it is turning around now."
Christine O' Keefe, vice president of investor relations, Lockhart Realty Inc., said developers "have to study the market and make sure that when you build, it is something that is needed."
So what is the incentive for developers to build for individual tenants? The tenant's specific needs.
"If it is a national company, usually the case depends on what type of store it is and what space they need" to determine whether to build, Carthy Thomas, marketing director for Tutu Park Mall, said. Joseph Bonanno, property manager of Four Winds Plaza, agrees.
"Some people must have enough money to invest in buildings and must have special needs that they must build buildings," Bonanno said.
Cohen agreed that special needs have to be met.
"Sometimes a lot of empty space is not suitable for the people," Cohen said.
This, coupled with the fact that "they might be getting some very good deals from the land owners," such as options to build on leased land instead of having to purchase it, makes building new space attractive, Bonanno added.
O' Keefe described it as a "two-sided problem" because along with the needs of the tenant, there also has to be a landlord who is willing to work with the tenant's needs. That is why she describes long-term land leases, such as the one in Market Square East, as being an attractive compromise between the needs of the landowner and the tenant, who then builds his or her own building.
This was the case with the Office Max building owned by Tutu Park Mall.
It required 23, 000 square feet — "a bigger space than was available within the building," Thomas said.
Just down the road, Four Winds Plaza has about 25,000 square feet available and the Fort Mylner Shopping Center has one vacancy. But the fact that Tutu Park Mall enjoys IDC benefits makes competing unfair, Bonanno said.
"We really can't compete," he said, because Tutu Park Mall was built on leased land and its owners pay no gross receipts taxes and very little property taxes, which for Four Winds average around $160, 000 a year, Bonanno said.
"They've been given tremendous incentives," Bonanno said, referring to the IDC benefits the mall enjoys.
Cohen called Tutu Park is a "very successful mall" and said that "in the coming months, as the area comes up, the space will fill." "I'm in St. Thomas for the long-haul," Cohen said, adding that he looks at long-term investment. "You always have a risk factor as an investor and it is only natural to like things to be rented 100 percent," but sometimes there are vacancies, Cohen said.
What are some adverse affects of building?
Wheatley said the market is crowded with competitors who feel that building and renting commercial space is very profitable.
People feel there is a lot of money to be made there and they say, 'Hey why don't I get some of that money?'" Wheatley said.
The result: more commercial space is created than needed.
When business gets slow, you have to work harder and get more creative, Cohen said, such as by giving an old building a "face lift" or by dividing large spaces into smaller, perhaps easier-to-rent ones.
"On an island you have a finite amount of space, not just with shopping areas but hotels also, " O' Keefe said.
She lamented that in today's "throw-away" culture, instead of refurbishing old areas, people often abandon them and "ghettos" are created.
So what are some ways to ensure that a commercial area will be successful before it is built?
"One business creates the traffic and then you have to have other businesses to feed off of the traffic," Cohen said.
It was through observing existing businesses in the Smith Bay area and in Red Hook, such as the ferries, the hotels and Coral World, that he found a significant traffic flow that should support the new Al Cohen's Plaza in Frydenhoj. And "visibility is very important," he said.
"I feel that that area in the next year or two will be developing," he said.
He plans to build the new shopping center in phases — a more conservative approach, he said, that allows him to build to accommodate growing demand.
