Puerto Rico’s shopping centers see 5% Y-O-Y sales increase in 2023
Several local malls are slated to welcome new tenants, which call for redevelopments and redesigns to accommodate new services and trends.
Puerto Rico’s biggest shopping centers saw an overall increase of 5% in retail activity last year compared to the previous year, and executives believe the trend will continue as they evolve to meet changing consumer needs.
During a roundtable discussion with local media, members of the Puerto Rican Association of Shopping Centers (ACCP, in Spanish) — which represents more than a dozen local malls — addressed trends and plans for this year, including tenant mix, construction projects and a return to pre-pandemic results.
Adolfo González, president of Empresas Caparra, parent company of San Patricio Plaza, said last year was “good, with a recovery back to the pre-pandemic level in terms of foot traffic and sales.”
The shopping center in Guaynabo is reporting a 90% occupancy rate. González said the demand from the type of retail tenant has shifted, “especially because anchor tenants are now fewer than they were in the past, and we’re no longer seeing easy changes for that type of ‘big box’ space in Puerto Rico.”
For example, the locations left by the departure of major retailers like Kmart, Bed Bath and Beyond, and Sears are now being split into smaller spaces for new tenants that don’t require such large footprints in terms of square footage.
“There’s demand but not from the same tenant. We must be creative in terms of how we address that revolution in the industry,” González said. “In terms of restaurants, from fast foods to high-end, all of them saw an increase in sales above inflation, and that has been very positive and it’s something that’s ongoing in this first quarter of 2024.”
San Patricio Plaza completed a major construction project last year known as Liberty Square, which now represents 15% of the mall’s overall tenant space. The area has attracted new and existing retailers and offers activities that go beyond the shopping experience.
He also said that eight new Tesla electric vehicle charging stations are being installed at the second level of the mall’s multi-story parking facility, increasing the total to 17, with 12 being high-speed.
González mentioned that general expectations for this election year are “reserved” in terms of tenant investments, “but we’ve seen a commitment for new spaces and conversations are ongoing, so we expect a very positive 2024.”
Construction costs, the time it takes for permits to be approved and expenses related to security are other concerns that the retailers shared as a sector, agreeing that all those elements represent challenges in different ways.
“The increase in construction costs is significant, but within that — as happens in other sectors — 25% of costs are for taxes and other expenses related to the government. It’s something that needs to be looked at closely because, although there’s still federal funding coming in that will be used in positive ways for the economy, we must address our costs of doing business,” he said.
“Security services carry an 11.5% sales and use tax, which we think should be addressed and lowered,” he added.
He also mentioned the aspect of need for office space, which is somewhat related to retail business in the sense that increasingly, people want their workspace to be close to shopping and restaurants.
“The market has increased demand for mixed use. There’s demand for those properties, which has been positive,” he said. “Although the pandemic has made people go less to the office, this type of occupancy helps us maintain traffic, especially to complement during the day,” said González.
He also said there’s an overall demand in the San Juan metropolitan area for spaces dedicated to professional services, such as medical offices. Increasingly, those types of businesses are moving into areas near or inside shopping centers in response to another trend: a demand for wellness facilities.
Malls share occupancy levels, plans
During the roundtable, representatives from various mall operators with one or more shopping centers across the island offered a rundown of their tenant mix and plans for 2024.
Mariví Pérez, who represents a family-owned chain of strip malls — Plaza Juana Díaz, Plaza Encantada and Plaza Santa Isabel — said the average occupancy rate at the shopping centers is 96%.
“In line with what González was saying, we had a Kmart that we split for a Selectos and a Pepe Ganga to move in,” she said. “We were able to divide that. Sales have been excellent for them and they’ve brought a lot of traffic to the shopping center.”
Pérez said management is now looking to fill the unoccupied spaces with offices “to attract a public that doesn’t depend on the internet, that doesn’t go to an office, that is physical and can shop while they wait,” adding that online sales have taken a toll on their business.
The company is now developing Plaza Juana Díaz Sur on a 22-acre lot that has already drawn a Banco Popular, a credit union, Wendy’s and Popeyes.
“We’re happy with how the area will be developed. We were approached by the Juana Díaz mayor’s office to participate in a pilot project for a trolley concept that will bring people from the town and make several stops, and we’re included.”
She made a call for consumers to return to the malls for their shopping needs, “because it’s not only about the experience, but that it helps Puerto Rico because then the money stays in Puerto Rico and helps us fight against all the other challenges that we have, like the high costs of doing business.”
Antonio Meléndez, of Urban Edge Properties — which manages the Montehiedra Shopping Center and Las Catalinas in Caguas — said it closed a “positive 2023 and began 2024 in the same way” with new tenants at both retail properties. While Montehiedra’s occupancy level is at 98%, Caguas is at 100%, not including the former Sears property which has been sold and is being remodeled to house several tenants, he said.
“But we’ve had the challenge of electricity instability and the increase in security costs,” he said.
Edwin Tavárez, general manager of Plaza Las Américas and Plaza del Caribe, said foot traffic at the Hato Rey mall saw a 10% increase in 2023 when compared to 2022, while the Ponce mall saw a 3% growth.
Meanwhile, Carola Pierluisi, of Curzon Puerto Rico, which manages nine shopping centers across the island, said since it picked up the portfolio in 2021, it has been improving the malls and analyzing possible redevelopment projects in some of them.
Plaza del Sol in Bayamón has a 96% occupancy level and is gearing up for the opening later this month of a new Burlington store where the former 40,000-square-foot Bed, Bath and Beyond used to be.
Plaza Río Hondo is 81% occupied and 97% leased, with the difference being that it does not count the space formerly used by Kmart, whose contract expires in 2027-28, she said. A 15,000-square-foot Golden Corral is slated to open there later this year, while other stores, like Skechers, will expand their spaces, she said.
Plaza Walmart is 90% occupied, while Plaza del Norte is 82% occupied and 97% leased, due to another pending contract there, she said. Plaza Isabela is 99% occupied, where Chick-fil-A is moving into a former Ponderosa and Walmart is adding 4,000 square feet to add a pick-up area, she added.
Over at Plaza Escorial in Carolina, which is 98% occupied and 99% leased, the island’s first Texas Roadhouse is close to opening, but is waiting on permits, said Pierluisi.
“On that issue, we have to say that we have shopping centers in different towns and the permitting process varies a lot from municipality to municipality. We’re trying to help Texas Roadhouse to be able to open their first location as soon as possible,” she said.
As for vacant spaces, Pierluisi confirmed that a total of eight retail spaces next to Old Navy will be joined together to create a 29,500 square-foot box for Burlington, which would be open at the end of 2024 or first quarter of 2025.
Plaza Fajardo is 98% occupied, and like in Carolina, a total of seven retail spaces totaling 25,00 square feet will be combined to fit a Burlington store there in 2025, next to the existing Walmart, she said. Plaza Cayey is 92% occupied, while Plaza Atlántico is 37% leased.
“That mall [Plaza Atlántico] has somewhat of an obsolete format, because the anchor tenant doesn’t have direct access to the mall and we’re in the redesign and redevelopment phase of that mall,” she said. “We would eliminate the inside corridor and turn it into a power center with spaces of between 15,000 square feet and 30,000 square feet.” Aside from Capri, which is the current anchor tenant, between five and seven new stores could be added to that mall with construction starting next year, she said.
