Rebuilding Baltimore Under Armour Plans One of the Biggest Urban Redevelopments in U.S

Rebuilding Baltimore Under Armour plans one of the biggest urban redevelopments in U.S. history By: Ben Johnson | February 2017 How often does a major retailer get the chance to stamp its brand on an entire city? Yet this is what Under Armour seems to be doing in Baltimore. On a large peninsula called Port Covington, along the Patapsco River, in South Baltimore, Under Armour founder and CEO Kevin Plank is moving forward with plans for one of the largest urban redevelopments in the U.S. — in one of the country’s most economically challenged cities. This $5.5 billion redevelopment of 236 acres of derelict industrial land will include 18 million square feet of shopping, offices, hotels and attractions, plus 7,500 residences, 42 acres of public parks, some new interchanges on Interstate 95 and a spur off the city’s light-rail system. The project will also feature a 50-acre Under Armour headquarters campus. Beyond being a retail CEO, Plank is also a developer: His Sagamore Development Co. venture is spearheading the Port Covington project. As recently as December, during a keynote address at ICSC’s New York National Deal Making Conference, Plank was touting Under Armour’s success as the second-largest maker of sports apparel, after Nike, as well as the Port Covington project’s importance to Baltimore, Under Armour’s corporate home since 1998. “[Plank] is one of our biggest cheerleaders, and not only does he promote the city, but he stands behind his commitment to the city,” said Tom Fidler, an executive vice president and a principal of Baltimore-based MacKenzie Commercial Real Estate Services. “He also understands retail at its core, how consumers shop and what consumers want. If you put that on the table when you are developing the mixed uses in Port Covington, he’s got it — he knows. Above and beyond his financial commitment to the city, I don’t think there is any past elected city leader who has pulled off what he has pulled off.” Meanwhile, in New York City, Under Armour is taking over the former home of FAO Schwarz, on Fifth Avenue, where the company plans to open a 53,000-square-foot Brand House store next year. Thanks to Baltimore’s approval of $535 million in public bonds to be issued through a special tax-increment-financing district, Sagamore Development expects to begin construction on the Port Covington infrastructure by the end of this year, with new buildings to be started next year. “We anticipate that the redevelopment of this peninsula will be a catalyst for the overall Baltimore market, particularly the CBD and South Baltimore markets,” said Matthew Myers, a senior research analyst at Cushman & Wakefield. Given the project’s 25-year build-out plan, precise details of its retail segment are still in development. “From a retailing perspective, I think it’s still a little early to say who is going to be there and when,” said Fidler. “They’ve got an idea of the ratio of the amount of square footage of retail in relation to the amount of residential and office, but that thing is going to be unfolding as time goes on.” Regardless when the retail is developed, it will become part of a Greater Baltimore retail market that is undergoing a renaissance. According to fourth-quarter data from MacKenzie, the Baltimore retail market ended 2016 with an average vacancy rate of just 4.4 percent and an average rental rate of $19.40 per square foot, up from $18.60 during the same period of 2015. “Consistently now for the fourth year in a row, our rents have jumped, and our vacancy rates continue to show a decrease,” said Fidler. He credits some of the recent rental increase to a substantial amount of restaurant leasing. In fact, 70 percent of Baltimore’s retail leasing in 2016 was related to restaurants. But there is also cause for some care. “The concern is that there are very few new retail businesses expanding, opening and operating, like there were in 2004 and 2005,” said Fidler. “We are struggling and concerned with the future of retailing for soft goods and apparel. There are very few national retailers in that use category that you can cold-call when you have space available.” On the flip side, locally based restaurateurs are doing the bulk of the food-related leasing. “Space is being absorbed by strong, local and regional concepts,” said Fidler. “That is an indication that the outcome of the 2007–2008 recession forced consumers to take a step back, and we are finding ourselves more committed and loyal to local businesses.” Local demand for restaurants is being fueled by the growing Millennial population, which is also behind Baltimore’s residential and multifamily growth. Local malls, meanwhile, are adapting to the changing market too. The biggest local news is the current teardown of Owings Mill Mall, in suburban Baltimore. This mall opened in 1986 and then fell on hard times; by 2015 only anchors Macy’s and JCPenney remained. After Owings Mill Mall is demolished, later this year, owner Kimco Realty has plans to develop a large open-air shopping center on the site. Development opportunities are almost exclusively confined to the redevelopment of existing retail properties. A good example is the Foundry Row project, in Owings Mills, about two miles from Owings Mills Mall. Foundry Row held its grand opening in November on a 50-acre site that was formerly a Solo Cup factory. It comprises 356,000 square feet of retail space anchored by a Wegmans, and an additional 40,000 square feet of office space. “Most of the local counties are encouraging developers to reuse existing sites, so we don’t have any new 15-acre, raw-land shopping center developments,” said Fidler. “We just don’t have those anymore.” As for retailers entering the market, Fidler points to one expansion-minded major supermarket chain in particular: “Certainly, we are watching like everybody else here on the East Coast the potential growth and market position of Lidl, a German-based grocery chain, which is scouting for multiple locations throughout Baltimore and the Maryland market, including the mid-Atlantic,” he said. “We are aware of a handful of projects they are working on, so they are certainly coming in 2018.” Thus, thanks in large part to the initiative of Under Armour, things are looking up for Baltimore. Published January 31, 2017 http://www.icsc.org/sct/shopping-centers-today/february-2017/rebuilding-baltimore.

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