The growth of e-commerce in the past decade has put big box retailers in a tough spot.
Those who have been able to transform their business models to meet evolving consumer demands have stayed afloat. The ones who can’t change have either gone out of business or significantly downsized their retail space.
In either case, the large physical structures that gave big box retailers their name are quickly becoming the white elephants of the real estate world, says Eliot Kijewski, Senior Vice President at Cushman & Wakefield/CRESCO Real Estate.
“The big question is what do owners and communities do with these buildings?” Kijewski says. “How do they reposition and market these structures not as a stale mall or a vacant building, but as a valuable piece of property? There is a lot of cooperation that needs to take place between community, developer, owner and seller in order to find solutions.”
Smart Business spoke with Kijewski about what communities can do to breathe new life into these abandoned big box retail spaces.
What percentage of retail sales now occur online?
E-commerce sales during the first quarter of 2017 accounted for 8.5 percent of total retail sales, according to the U.S. Department of Commerce. That is up from 3.6 percent in the fourth quarter of 2008. E-commerce sales totaled $33 billion at the end of 2008 compared to $105.7 billion during the first quarter of 2017, per the same report.
Are indoor shopping malls likely to become extinct?
There are examples of indoor shopping malls that continue to do well. Great Lakes Mall in Mentor is losing Sears, but the mall itself is not anywhere near being on its last legs. The company that owns it recently announced a new entertainment center that will open up in the mall.
It’s in a middle-class to upper middle-class community, the economy is decent and people are going to the mall and spending money. Beachwood Mall is probably in good shape.
But other indoor malls in the area have lost most, if not all of their key tenants. Randall Park Mall is currently being demolished, Midway Mall in Elyria was recently sold at auction and Parmatown Mall has been converted to an outdoor shopping facility. If the indoor shopping mall as we know it is going to stay, it depends on the demographics and the anchor stores that are there. Unfortunately, in too many cases, those anchor stores are closing.
What can be done to salvage big box retail spaces that are no longer being used?
Communities need to look at these spaces and think about what their people would like to see. Ohio Technical College has taken space at the old Randall Park Mall formerly occupied by J.C. Penney and converted it into a college. It has big square footage and is wide enough to create a faux store that includes classrooms.
This is a concept used by motorcycle and watercraft dealers whereby students learn how to use the computers and tools utilized to fix dealer-specific equipment.
At Richmond Mall, a deal is in the works to bring a packaging company to the former Sears location.
Other potential uses for these buildings include call centers, indoor entertainment facilities, assisted living communities, libraries or light assembly uses.
How difficult would it be to open for business in these spaces?
In most cases, these buildings have decent highway access since they were built to serve a retail clientele. There is an abundance of rooftops, public transportation and parking. You’re not starting from scratch. The sites also have electricity, water and restrooms.
If the buildings haven’t been used for some time, there are likely repairs that need to be made, particularly with the rooftops, but the repairs are manageable.
Zoning is also a consideration. Developers looking to revitalize a former big box space need to consult with that community’s zoning board to determine if there’s a fit, or a likelihood that zoning could be changed to accommodate the new use.
The reality is that empty buildings are doing nothing for a community or its economy. If they can be purchased for another use, and be revived or repositioned, it can be a win for everyone. ●
Insights Real Estate is brought to you by Cushman & Wakefield/CRESCO Real Estate.