A retail boom has hit Route 1 in Saugus, where developers are spending millions to turn old properties into new shops and restaurants, and clearing land to make room for more big stores.
The growth spurt occurs as retail sales struggle nationally while the economy heads closer to a recession. Retail sales fell 0.6 percent nationally in February, reflecting weak auto, furniture, electronics, and appliance sales, the US Commerce Department announced this month.
But businesses investing in Route 1 are betting the lull won't last.
Trader Joe's, PetSmart, CVS, and Bank of America will be new to the 4-mile strip. Border Cafe, La-Z-Boy Furniture Galleries, Jo-Ann Fabrics & Crafts, and a Dunkin' Donuts - already players on the pike - are trading spaces.
Border Cafe and La-Z-Boy will move from the southbound side to the new Shops at Saugus, a $35 million complex being built on the former Caruso Diplomat site on Route 1 north.
Developers of The Shops at Saugus - designed at 110,000 square feet - don't expect a quick payback.
"We're long-term owners," said Andrew Couch, vice president of investments at Regency Centers, a Florida-based company that is a codeveloper of the project. "We think we'll have a vibrant mix of ten ants."
Anchored by Trader Joe's, PetSmart, and La-Z-Boy, the new center, expected to open July 1, also will have space for smaller retailers and service businesses.
Border Cafe will have its own restaurant building on the site, while Starbucks and Qdoba Mexican Grill will share another.
Jay Donegan, a Lynnfield native who now is a Virginia-based developer, is a partner in the project. "We think we have a development that's going to hark back to the days when Caruso's Diplomat was an institution on Route 1," he said.
On Route 1 south, Jo-Ann Fabrics & Crafts will move to a new store beside its current location, where a 13,000-square-foot CVS store will replace the long-closed OfficeMax. Bank of America is converting the old Bickford's restaurant into its first Saugus location on the other side of the development.
A Dunkin' Donuts northbound near the Lynnfield line will be torn down, and a smaller store will be built to improve traffic flow on the tight parcel, town officials said.
The projects stand to enhance the highway's status as a premier commercial corridor, a local business executive said.
"Route 1 in Saugus really is the gateway of the North Shore," said Kevin Tierney, chief executive officer at Saugusbank, which expanded to Route 1 last year, taking over the former Krispy Kreme doughnut shop at the Lynn Fells Parkway interchange.
The bank, which has $200 million in assets, has grown 15 percent in the last 18 months, much of it linked to its expansion to Route 1, Tierney said.
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"It's been a terrific location," Tierney said, noting the branch has drawn new customers from Lynnfield, Melrose, and Peabody. "The primary reason we selected this location is for Route 1. . . . It is really a regional location."
High traffic counts, estimated at 120,800 vehicles a day in 2006 according to the latest data from the state Highway Department, have steadily driven development on Route 1.
Access and strong demographics also are major factors, keeping what's known as the old Newburyport Turnpike on the radar of national chains and developers.
"Route 1 is one of the better places, across the state, for visibility and access," said Jon B. Hurst, president of the Retailers Association of Massachusetts. "It's a major corridor. . . . A lot of people either live near there, or drive through there."
But the stretch of highway - known for larger-than-life landmarks such as the orange dinosaur at the Route 1 Miniature Golf Course and the towering cactus at Hilltop Steak House - has taken its share of hits in recent years. Caruso Diplomat, once a marquee function facility, sat dark for years. OfficeMax, a casualty when the chain downsized several years ago, also sat idle. Now those old properties are being redeveloped into new shopping venues, while other projects are breaking new ground.
A mountain of stone and dirt - 400,000 cubic yards - will be moved to create space for two retail locations behind McDonald's on Route 1 north.
No tenants are yet signed for the 18-acre development, estimated to cost $17 million to $22 million, the developer said.
"We have very good prospects," said project manager Rob Noto. "They're not making any more land on Route 1. . . . Retailers want to be out there. It's a proven strip."
A supermarket chain that has not been identified is negotiating a lease to move into the former Wild Oats location at Saugus Plaza.
"This is Route 1," said Todd Finard, a partner at Finard Properties of Burlington, the family-owned firm that built the plaza in the 1960s. "It deserves to have a top product out there."
Stonehill Corporate Center, adjacent to the Days Inn, also on the southbound side, plans to add 60,000 square feet of office space, according to an an attorney representing the owner.
Hooters - the restaurant chain that has been eyeing Saugus since the early 1990s - has asked the town for an application to transfer the liquor license from the former Famous Dave's. The rib joint closed on Route 1 south and Hooters officials would like to open there, town officials said.
On Route 99, just off the pike, LA Fitness Center is building a new location next to Lowe's Home Improvement Center, which replaced the old Palace nightclub.
Despite the economic downturn, developers are clearly investing in Route 1 for the long haul.
"It's not a good time for the industry," Hurst said. "It might be a good time to make an investment if they can get deals on property, or lower construction costs. It's certainly an investment in the future."
Kathy McCabe can be reached at kmccabe@globe.com.