IKEA to rise amid a retail explosion

Shonda Novak |
Source: American-Statesman

Swedish retailer breaks ground in region where many more acres are already sprouting stores

Swedish furniture retailer IKEA turned the first shovel of dirt Wednesday on its first Central Texas location, a 252,000-square-foot store in Round Rock that is expected to draw 1.5 million shoppers a year from across the region and beyond.

The groundbreaking for the mammoth store marks not only the official start of construction, but also the latest step in the region’s biggest-ever retail surge.

Almost 7 million square feet of space, roughly equal to seven regional malls, will open by late 2007, creating several thousand jobs and a sales tax surge for cities stretching from Round Rock to Buda, Austin to the Village of Bee Cave.

The retail boom is being propelled by the region’s growing population and healthy economy, which added nearly 27,000 jobs in 2005.

The boom is unprecedented, said Chris Ellis, a principal with Austin-based Endeavor Real Estate Group, developer of the biggest project, the 1.6 million-square-foot Southpark Meadows at Interstate 35 and Slaughter Lane.

“Even after this wave of retail comes on line, there will still be significant demand for retail in Austin,” Ellis said. “But it’s unlikely you’ll see this much space coming on line within such a compact period of time in the future.”

The retail wave will flood Central Texas with new department stores, specialty shops, multiplex movie houses and big-box stores.

While many will be familiar names, many more will be new to the area. They include the region’s first Neiman Marcus and Macy’s department stores, which will anchor the Domain, an upscale 700,000- square-foot outdoor center that Simon Property Group Inc. and Endeavor are developing in North Austin.

The Domain, plus Simon’s Round Rock Premium Outlets, will bring many new high-end retailers to the area. Simon hopes to recruit retailers such as Tiffany & Co., Polo Ralph Lauren and Barney’s Co-op to the Domain, for example.

Dillard’s will add a fourth Austin store at the Hill Country Galleria, a regional mall under construction in the Village of Bee Cave.

The retail explosion is bringing thousands of jobs. And cities, some of which awarded generous incentives for the projects, are salivating over the sales tax dollars to come.

The Round Rock Premium Outlets mall alone is creating up to 1,500 construction jobs. Once the 120-store center opens in August, it will have 1,000 fulland part-time workers to serve up to 7 million shoppers a year, some of them coming from other states and Mexico.

A conservative estimate is that mall eventually will generate about $3 million in sales taxes a year for the city, said David Kautz, assistant city manager and chief financial officer.

Other jobs are coming as road improvements are made near some of the projects.

Kautz said the additional retail will help diversify an economy where Dell Inc. generates about half of the city’s annual $58.6 million in sales taxes. In fiscal 2007, the city expects its sales tax revenue to be 8.25 percent higher than in fiscal 2006.

IKEA will also significantly bolster the sales tax base, Kautz said.

The Round Rock store will create 500 construction jobs and have 300 permanent employees, including part-time workers who will receive benefits. IKEA’s policy of paying benefits to part-timers was a factor important to Round Rock city officials, Kautz said.

“We’re not just a unique retailer, but a unique employer,” said Joseph Roth, the company’s director of public affairs.

In addition to IKEA’s contemporary-design furniture and household items, from couches and desks to silverware and rugs, the store will have a supervised children’s play area and a 250-seat cafeteria-style restaurant.

The chain has a base of nearly 30,000 Central Texas customers who have shopped online or at other IKEA stores.

At Wednesday’s groundbreaking, Round Rock Mayor Nyle Maxwell surveyed the soon-to-be-retail-rich corner of Interstate 35 and University Boulevard (formerly Chandler Road). “This is the epicenter of retail growth in Central Texas . . . in jobs, sales tax collection and economic development,” Maxwell said.

The IKEA store and Endeavor’s adjacent University Oaks shopping center, plus surrounding retail, soon will be “importing sales tax dollars and importing capital from not only the primary market, but customers will be driving from 100 and 150 miles away,” Maxwell said. “That’s what’s significant.”

The biggest center by far is taking shape in South Austin. With Southpark Meadows, Endeavor has transformed a former outdoor concert venue into a retail juggernaut, where a growing list of stores are joining Wal-Mart, Petsmart and Circuit City, which opened in the center’s first phase last year.

Southpark Meadows, which is expected to be finished next year, could generate $3.5 million a year in sales tax revenue for Austin, and the Domain, about $500,000 a year.

American-Statesman reporter Camille Wheeler contributed.