SOUTHEAST SNAPSHOT, JULY 2007

Chattanooga, Tennessee Retail Market

Retailers in Chattanooga are beginning to recognize that the market often justifies two stores. This has led to development in the Hixson area during the last couple of years of smaller format, yet profitable stores for retailers such as Best Buy and PetsMart. That trend should continue with the anticipated construction of a new lifestyle center in that market in 2007-2008.

The regional mall area around Hamilton Place has matured. CBL & Associates Properties’ flagship is undergoing renovations and new outparcels are being created for additional restaurant development. No significant change is anticipated.

There is a level of uncertainty in the neighborhood retail sector. With the announcement of dominate grocer, Bi-Lo, being on the block many of the other grocers are evaluating that opportunity and thus new development outside of what was already announced has taken a hiatus. The purchase of Eckerds/Brooks by RiteAid has slowed drug store development marketwide too.

The 35-year old Northgate Mall is undergoing a makeover. According to Joe Janosko, general manager for the General Growth-owned property, the mall is adding a streetscape style exterior, adding new tenants, and plans on tearing down a portion of the old Carmike Theater strip center to make room for new retail. Carmike built an entirely stadium seating complex behind the mall a couple of years ago.

Also, Publix is entering the market with 3 stores announced so far (Hixson, Ooltewah, and East Brainerd). Two of the stores will be new construction while anther will occupy a renovated former Winn Dixie. Bi-Lo, despite being for sale as a company, has moved forward with the construction of two new large supermarkets in Hixson and in East Brainerd. In total, the Hixson area is receiving more than 120,000 square feet of new supermarkets within one mile of each other.

A majority of the new development is taking place in the northwest portion of the county with the Hixson area (Northgate Mall) as its center point. This is a result of the previously mentioned realization of major retailers that Chattanooga is at least a two-store town. It also mirrors the shift in population growth from the relatively developed northeast part of the county to the lesser developed Highway 27 corridor. Another reason for this shift is the relative maturation of the areas around the regional mall, Hamilton Place, and in the East Brainerd and Ooltewah areas.

Also the Northshore area is continuing to see new lifestyle type retail development. This is anchored by the new CS & Associates developments One & Two North Shore. These mixed-use facilities will offer some big-city amenities in one of the south’s most vibrant areas.

CBL & Associates Properties is the dominating player in the retail market. However, General Growth is making significant investments in its Northgate Mall property. Wolford Development continues as a major player also. Its two power centers in the Hixson market have been the major force behind that area’s exponential growth.

One cannot help but get excited about Chattanooga. It’s one of the best quality-of-life locations in the southeast. Retailers are starting to recognize more sophistication in the Chattanooga market. The future will see retailers locating in Chattanooga that previously overlooked the city in favor of its larger neighbors to the north and south.

— Tom Kale, Jr., is vice president of NAI Charter in Chattanooga, Tennessee.


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