Shopping Centers Today is the news magazine of the International Council of Shopping Centers (ICSC)
Issue link: https://sct.epubxp.com/i/448937
42 S C T / F e b r u a r y 2 0 1 5 Banner Health bought a for- mer Bashas' grocery store and surrounding buildings to develop a medical mall for offices, labs and surgical and neurology centers. Coming soon to yet another former Bashas' grocery site, this one in Gilbert, is an entertain- ment center called Fat Cats. While developers else- where have achieved bet- ter yields per square foot by tearing down old boxes and replacing them with mul- tifamily buildings instead of retail, there is too much available land in Phoenix to make that formula work, Cheatham says. For cities the downside of converting boxes to nonretail is the loss of local tax revenue; Leading Edge Academy's reuse of that old Gilbert supermarket, for instance, reduced property-tax payments there from $160,000 annually to nothing, accord- ing to Maricopa County officials. Most of the former Borders spaces that came avail- able after the chain's 2011 bankruptcy were snapped up quickly, because they happened to be class-A real estate, says CBRE's Caruso. Some were taken by nonretail users like Hope of the City Church, which now occupies the for- mer Borders at Westfield Southcenter Mall, near Seattle, but most remain in retail use. Among the latest refilled former Borders is a two-story space in Wynnewood Shopping Center, near Philadelphia; the space was taken over by a DSW and a Mad Mex restau- rant in mid-2014. Mad Mex, a regional chain, took 7,700 square feet on the first floor, while DSW took over 20,000 square feet, mostly on the second floor. A Borders space at the Watters Creek mall, in Allen, Texas, was leased by Michaels, which opened its store there in October. Less fortunate may be the owners of boxes in 'C' and 'D' locations; these typically remain empty owing largely to market shifts, according to Mez Birdie, director of retail investment at Florida-based NAI Realvest. Some of those hard-to-lease big boxes are finding new life as climate-con- trolled self-storage properties, he says. Though some 'B' boxes are leasing out to retailers as the market improves, nonretail tenants occupy the majority, Birdie says. "These add value to a property as long they don't adversely impact parking and the visibility of tradi- tional retail tenants." Some choice box locations sit empty simply because their leaseholders want it that way. "The philosophy of most retailers is to avoid assisting competitors directly or indirectly," Birdie said. "Thus, boxes of all sizes continue to remain vacant — with rent being paid on them." Some will stay vacant until the lease expires, a scenario that can create a negative chain reaction for landlords, Birdie says. Insurance on vacant properties tends to be double or triple the rate of occupied property, and some empties cannot be insured at all, he says. "Vandalism and property maintenance is also a huge challenge," Birdie said. Other owners are repurposing big boxes by writing off some or all of their depth and accommodating multiple smaller retail- ers, says Kenneth Katz, a partner of Houston-based commercial real estate firm Baker Katz. Cities and counties are pushing the re-leasing of big boxes by attending ICSC's RECon, in Las Vegas, and other meet- ings. "It used to be that cities would attend ICSC events to promote and market new developments only, but in recent years they've been actively promoting redevelopments," Birdie said. "They recognize the opportunities to improve economic conditions and their tax base." Some big boxes that have sat vacant for upwards of a decade are finding new life. In Gainesville, Fla., Lucky's F l i g h t a n i n D o o r t r a m p o l i n e m o v e D i n t o a F o r m e r c o m p U S a b U i l D i n g .