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CEO Roundtable: Commercial Real Estate & Development

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Springfield Business Journal Executive Editor Christine Temple discusses trends in commercial real estate among retail, office and industrial spaces with Curtis Jared, president and CEO of Jared Management LLC and Jared Commercial Real Estate LLC; Caleb Moreno, president of Moreno Group Commercial Realty; and Ryan Murray, CEO of R.B. Murray Co.

Christine Temple: Let’s start looking at the local commercial real estate market. If you could, characterize that in some words, in some temperature gauges.
Ryan Murray: I would say it’s stable and healthy compared to what we see in certain other markets.
Curtis Jared: It’s definitely slowed down some, but the inquiries and prospective tenants have probably been more realistic. People that just didn’t have the ability to do deals have kind of finally gone by the wayside. There’s a lot more quality deals, fewer deals, but more quality deals.
Caleb Moreno: Quality deals – quite a bit of them going on. We’re having to comb through them and the Springfield market’s great. It’s strong. I wish we had more inventory and better properties because we are definitely seeing the need here. It was not reality the last 36-plus months. With the loan rates that we had, the values were unrealistic.
Temple: What is behind that stabilization and boost in inquiries?
Murray: People had pent-up demand with limited supply. You had, like Caleb said, extremely low interest rates spurring on development opportunities, but also you had a ton of money being funneled into the system. And you had unprecedented shifts in e-commerce requirements throughout the pandemic. That pushed demand profile significantly higher. As people began to unwind and come out of the pandemic, they revisited things that they hadn’t been able to do before. So, that then further pushed retail and travel-related retail. You got industrial being pushed on the e-commerce front. Now, people have reached what is now a stabilized standpoint.
Jared: We’ve got a very diverse, stable market here just because we’re not so reliant on any one industry. Friends of mine are in the mortgage industry, and I just asked them how their industry is going. They said the interesting part is that a lot of their new mortgages are a lot of people still moving from outside the area into this market. I’d say that’s kind of what we’re seeing on the commercial front too. We’re seeing a lot of other industries expanding from bigger markets, realizing the strength of the Springfield market. We use and if you look at the traffic counts, Springfield consistently places high. If you look at the different retailers in the state, a lot of our locations are always in the top 10%, if not No. 1 or 2.
Temple: Bringing in national statistics, a Cushman & Wakefield insight report that looked at Q2 showed that occupied retail square footage hit another all-time high and the national vacancy rate was 5.4%. They talk about that limited new supply and that demand. As far as the picture in southwest Missouri, what are you seeing with your vacancy rates?
Murray: I think we’re kind of the poster child for that.
Moreno: We don’t have enough quality properties out there for the tenants that we have. The pandemic showed us and taught us a lot. We’re very social creatures. We went to hearing Amazon taking over, brick and mortar was done, retail was finished, to now, hey, we’re back again. Online is still going to be there, but the pandemic really showed us that they want to be out shopping in the brick and mortar.
Murray: People really want to control where their dollars go as well. There’s a good mindfulness in Springfield, I believe, to support local businesses. Now, you’ve got the opportunity of spending your dollars in certain places. If you look at Curtis’ Brentwood Center, it’s littered with really good quality local retailers. If you look at the parking lot during the day, it’s busy and full. That’s absorbed a lot of good product in our market. You do have the larger vacancy challenges and that absorption of those products is what your Cushman & Wakefield study is talking about because that absorption’s been consistent. Springfield really fits that mold and that being the case, we are in a bit of an inventory crunch.
Jared: As far as the vacancy rate being so low, obviously the economic factors of inflation is definitely real. Before, you could build stuff relatively economical for what the rents were, but now you’re seeing the new construction being so much more costly that the rents you have to charge, you’re having a lot of people have heartburn in order to stomach what these new rates are. Unless you’ve got your bigger national retailers that are used to paying those in larger markets, it’s tough to make a lot of those new deals pencil. That’s why a lot of people are also looking at the redevelopment of existing properties in order to make the economics work.
Moreno: There’s been a big shortage on the add-value kind of properties as well, on rehabbing them and getting the right corridors. We just can’t find them, not in the Springfield market. Going back to the cost of retail and per square foot and what it’s costing the tenants to rent – what is it costing them to acquire and achieve an e-commerce customer? The cost has gone up quite a bit. You can’t get Google ads or Facebook ads at the cost it used to be five years ago. Brick and mortar tends to attract better tenants now.
Jared: That’s a good point. You’re starting to see a lot of these traditional e-retailers realizing that if they have a physical brick-and-mortar presence in a market, that also is awareness of their brand and product. Some of your older retailers that have gone by the wayside, when they start shutting down locations, their customers were disappearing at a faster rate than if they still maintained in a market. I just read an article recently that 90% of all of Target’s online and app orders are fulfilled out of the stores. Having a physical brick-and-mortar presence, you can now, instead of it just strictly being the walk-in retail customer, they actually turn it into a quasi-distribution center.
Moreno: I think Amazon is starting to realize that they need the brick and mortar to compete with Walmart and other aspects of retail. Retail’s just a phenomenal market because it’s evolving all the time.
Temple: Speaking to the health of those national retailers, we have seen more bankruptcies this year. Comparing where we are in 2023 to 2022, Cushman & Wakefield reports we had three bankruptcies of national retailers last year and we’re up to 15 this year. Of course, in our market, we saw the impacts of the bankruptcies of Tuesday Morning and Bed Bath & Beyond. How do you see the health of the national retail landscape?
Jared: Bankruptcy is not uncommon in retail, especially when you’ve got private equity sometimes buys out some of these companies and then they just suck the life out of it to where they leave a lot of these companies on life support. As far as the Tuesday Morning goes, this is their second bankruptcy since COVID. We saw this coming. It also boils down to real estate, the market that they’re in, which is also a reason why Dollar Tree is acquiring it. Dollar Tree is acquiring approximately 28 or so of the leases. Five Below is acquiring leases. Michaels is acquiring leases. That’s one of the biggest trends you’re seeing. Whereas before retailers would just liquidate and shut down, now they’re realizing because of the lack of new retail and the cost of building new retail, people are actually fighting, they’re bidding on these leases to take them over because it’s way more economical to go ahead and slip in their concept and take it over. It’s an opportunity for us.

Excerpts by Executive Editor Christine Temple,


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