Last year, Hispanic purchasing power in the United States reached nearly $600 billion — an 11 percent increase over 2002s estimated $540 billion. Studies citing statistics from the U.S. census, the Bureau of Economic Analysis and the Bureau of Labor Statistics predict that between now and 2020, personal consumption spending by Hispanics will increase, on average, 9.1 percent a year.
A firm grasp of the market and the culture is crucial to the success of redevelopment projects in predominantly Hispanic neighborhoods. In Phoenix, where we are based, Latinos make up about 34 percent of the population of about 1.3 million, according to the most recent census statistics (2000).
Since 1991, when we established ourselves in the Phoenix metro area, we've acquired several ailing properties in Hispanic areas, transforming them into strong, profitable shopping centers. Since we give every one of our centers, regardless of their locations, the same quality upgrades, our redevelopment process in predominantly Hispanic neighborhoods doesn't differ much from our other markets. The primary differences can be found in the initial transaction and subsequent rents: We acquire these properties for less money than centers in more affluent markets, so although rents in Hispanic areas are cheaper, the return on our investment is still solid.
As we began our work in Hispanic neighborhoods, we quickly discovered that clear communication is critical to the success, so developing a basic knowledge of the Spanish language was a priority. We work in quite a few neighborhoods where, frankly, if you don't speak Spanish, you don't operate.
About 20 percent of our tenants are Hispanic-owned businesses. This specialty market has a greatof potential, so we expect this percentage to keep growing. That's why 18 of my employees took Spanish lessons last year. The effort to improve communication between landlord and developer has proved successful, resulting in faster transactions.
Tenant mix is another important factor. Despite lower incomes (current statistics show the average household income for Hispanics is about three-fourths of that for the overall U.S. population), these households tend to spend more on basic necessities such as food and clothing. But they want good deals. Food stores anchor most of our centers. One popular tenant is Food City, a division of the Bashas' Supermarkets chain that caters to Hispanic shoppers.
Before determining tenant mix, talk to existing tenants; even go door-to-door in nearby neighborhoods to ask key questions: What types of retailers do residents want? When you take the time to fit your center's tenants with the existing community, everybody wins.
Indeed, business development and redevelopment is one of the single most powerful ways to revitalize a community, drive up the economy and increase neighborhood pride. Glendale Central Center, in a predominantly Hispanic Phoenix suburb, was battered and almost vacant for nearly 16 years. In 2002, we gave it a completely new, sophisticated look and anchored it with a 99 Cents Only store, a popular choice with neighbors. More than 1,000 people lined up for the grand opening of the center, for which we won the 2002 Redeveloper of the Year award from the City of Glendale.
In Mesa, Ariz., our transformation of Gilbert Plaza from a dated strip mall to a Mediterranean village-style market won us the City of Mesa Developer of the Year Award for 2003. Tenants include El Rancho Market and Dolex Dollar Express, among others. Though they are bargain stores, the atmosphere is more upscale than it ever was.
Our most recent redevelopment is Pollack North Park Plaza in suburban Chandler, Ariz. Catering to primarily Hispanic consumers, this shopping center was once dubbed “the ugliest building in Chandler.” After a facelift completed in April, it is helping revitalize the city's core.
No matter where our centers are located, we give them all the same treatment. The fact that the three previously mentioned centers were located in lower-income areas didn't change the way we approached each project. Pollack invests between $600,000 and $800,000 in each center.
Pay attention to quality and detail and, in the end, an attractive property combined with competitive rents will attract stable, successful tenants.
An upgrade in appearance usually has a contagious effect on surrounding commercial developments. When one property undergoes improvements, other businesses often will follow suit, even if only for competitive reasons.
Many redevelopers are afraid to put “risk money” in older, under-stored neighborhoods, but if the project is approached properly, everyone comes out a winner. Battered, neglected eyesores become invaluable shopping hubs. Suffering commercial cores get a boost in traffic flow and, subsequently, confidence. Community pride increases. Cities thrive off an economic boost.
And redevelopers can add another success story to their portfolios.
MICHAEL A. POLLACK
President of Michael A. Pollack Real Estate Investments in Mesa, Ariz., which, with its affiliates, owns more than 100 properties in Arizona, and Nevada totaling more than 4 million square feet.