SEATTLE-While the past few years have witnessed a massiveincrease in the amount of vacant retail space on the national “bigbox” market, many other retailers with expansion plans seeopportunity in these larger spaces made available by struggling orfailed retail chains. So says the Big Box Dilemma, a new whitepaper from Seattle-based Colliers International.

|

According to Colliers, nearly one-third of the nation’s top 500retailers have increased their growth plans for 2011 and beyond.“Strong store sales during the first half of 2010 have emboldenedthese companies to lock in competitive lease rates in newlocations.”

|

The white paper analyzed the big box retail market andidentified several other notable trends: Despite numerous big boxstore closings and chain liquidations, stronger retailers have beenre-leasing several of those vacated locations as second-generationspace. For example, the report notes that electronics chainhhgregghas opened more than 30 stores within the past 18 months—and plansto open 45 more in 2011. The majority of these new locationsformerly housed failed electronics giant Circuit City. AsGlobeSt.com reported, the appliance and electronics retailerrecently picked up 40,135 square feet at Swedesford Plaza, a152,000-square-foot center located at 428 N. Swedesford Rd. inBetwyn, PA.

|

In addition, top-tier big box locations—those within busyshopping centers or freestanding boxes situated on primeintersections—are moving quickly, thanks to once-in-a-generationpricing opportunities and to rapidly expanding discount andoff-price retail chains, the white paper says. “These top tier bigbox sites are currently accounting for the lion’s share of retailoccupancy growth in the US.” Colliers International expects most ofthese sites to be backfilled within the next 12 to 24 months.

|

“Big box retailers face one of the most challenging periods inmodern times, but the demise of several large chains has createdopportunities for other retailers,” says Garrick Brown, ColliersInternational’s retail research director. “There is still aremarkable amount of vacant big box space, but second generationuse is serving as a platform to help revive the sector.”

|

Among the white paper's other key findings: Total big boxvacancy registered approximately 300 million square feet nationwideat the end of May 2010—accounting for nearly 34% of all retailvacancy; Roughly 120 million square feet of that space alone wasvacated since January 2008—a total equivalent to the entireshopping center inventories of Baltimore, Cincinnati and KansasCity combined; Investment sales prices for big box assets in mostmarkets are down by 40% or more from the peak real estate valuesrecorded in 2006 and 2007. Rental rates have declined similarly.For tenants able to fund their own improvements, rental rates havebeen discounted by as much as 50% or more in select cases; Theoutlook for second and third-tier big box locations remains cloudy.It will likely take many years to backfill many of these sites. Insome cases, demolition or the creative adaptation of theseproperties to non-retail use remain the best options.

|

In addition to the former Circuit City locations that arealready leasing up, several retailers have targeted many of formerMervyn’s sites as suitable locations for their new stores,according to the white paper. Colliers International expects thatroughly half of the 149 vacated Mervyn’s locations—totalingapproximately 5.5 million square feet—will be backfilled within thenext year.

|

The big box retail market is showing other signs of improvement,Colliers says. Major retailers such as JCPenney, PetSmart, Staples,Walmart, Bed, Bath & Beyond, Best Buy, Dick’s Sporting Goodsand many others have all revealed expansion plans to commence overthe next several years.

|

In the white paper, Colliers defined “big box” as retailreal estate locations 20,000 square feet or larger.

Want to continue reading?
Become a Free ALM Digital Reader.

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications
NOT FOR REPRINT

© 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.

Natalie Dolce

Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.