And it probably will stay that way for awhile, predicts John M. Crossman, senior vice president/retail services director, Trammell Crow Co., Orlando. "It's a very serious problem," Crossman tells GlobeSt.com, "and the results could have been much worse if more product would have come on line."
He says the theater industry, particularly in Central Florida, was growing rapidly, "faster than demand." At the same time, newer retail developments were planning to use theaters as anchors. "Several (retail) projects were saved by not doing the theater deals," Crossman recalls.
Three out of 13 closed cinemas have reopened under new ownership and management in the last 18 months. They are the exception rather than what might have become the rule in other real estate categories.
Even if the closed properties could be retrofitted at a reasonable cost for other commercial uses, Crossman questions where the tenants would come from.
"Theater spaces are large anchor tenants typically with limited visibility," the broker says. "This means that there are only a handful of categories of tenants that would consider the space."
He suggests a cinema draft house concept (a theater with tables and a menu) or a church as possible conversion subjects but contends most churches can't pay market rents. Sloped floors, windowless buildings and oversized emergency exit doors often prohibit a conversion because of cost.
"The existing improvements have almost little or no value, which means whatever value remains is in the land," Crossman tells GlobeSt.com. "With the exception of several specific examples, it will be extremely difficult to convert theaters to other commercial uses," the broker concludes.
Location is another factor that discourages conversion, Crossman says. "There are not very many new tenants seeking these types of locations," he says.
Robert Wilson, a vice president in the Orlando office of Birmingham, AL-based Hoar Construction Co., brings up an element in cinema conversions sometimes missed in early considerations: parking. "Theaters are parking intense," Wilson tells GlobeSt.com. And office buildings need parking spaces, lots of them.
"If a conversion is possible depends on many factors and can only be judged one site at a time," Wilson says. "Load-bearing concrete blocks vs. structural steel; sloped floors vs. stadium seating; project location vs. location needs and other factors."
He offers an example of a conversion that might be cost-effective. "In my opinion, a typical 35,000-sf to 50,000-sf cinema requires enough parking for a 75,000-sf to a 100,000-sf five-story building," Wilson says. That's a plus for the property.
"If the demolition of the cinema costs $10 per sf ($500,000) and the (new construction) cost of the office building is $65 per sf, the total construction cost (excluding land cost and soft costs) is still less than $100 per sf," he reasons. "And the use is much better."
Crow's Crossman adds that finding uses for closed cinemas in Central Florida and across the country "could be the biggest challenge facing the retail industry this year--and the person who finds the solution will be well-compensated."
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
