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Americans are learning to adapt to change quicker than ever. Fashion trends change daily, and the weather in Nebraska changes every minute, but one thing stays constant: the security of real estate investment. The retail market has, in fact, changed, but there are still numerous ways to make the most out of the vacant big-box store at your shopping center. Retail real estate is still a secure investment if you are open to modifications.
Big-box spaces that were once home to the Kmarts, Shopkos and Sears of the world are now vacant across the United States, leaving landlords with eyesores at their shopping centers. There is no rental income and a lot less traffic coming to the centers, in turn hurting other tenants.
Demising For Smaller Tenants
One of the ways they have done this is by demising big-box spaces for smaller tenants. It takes capital, time and connection to key tenants to make this possible and profitable.
The story of e-commerce killing brick-and-mortar is greatly exaggerated, and retailers like Ross Dress for Less, TJX, Burlington and Five Below are proving this every day. They also should become your primary targets when dividing that big-box space.
Entertainment
An entertainment use may not take up all of a 100,000-square-foot former Sears, but it can provide traffic and excitement to a center in desperate need. Multiple types of entertainment uses can be a perfect backfill for big-box spaces: bowling alleys, arcade/sports bars (like Dave & Buster’s), movie theaters and food halls.
Churches And Education
As a nonprofit, it can be tough for a church to acquire adequate space. However, landlords often prefer some form of rental income instead of a space sitting unoccupied. This creates an opportunity for a church to lease a large space at an affordable rental rate. While the initial thought may seem overwhelming, it can be a project that can really allow for a church’s footprint.
School districts often issue bonds to help pay for building a new school. Voting on bonds can leave communities divided. Why not take advantage of an already erected building and use it for a school facility? Costs are significantly lower because minimal work needs to be done to the exterior. These vacant spaces are typically located near residential communities, and an abundance of parking is already in place.
Medical
Former Younkers, Sears and even dead malls become the perfect opportunity for a hospital system or doctor’s group to expand. These spaces can provide the square footage needed in an existing building, and it comes with the visibility and ease of access that retail properties typically provide.
Indoor Storage
Big boxes are also finding new purpose among storage users. Many baby boomers pride themselves in their possessions or collections. Where do these items go as they are passed along to Generations X, Y and Z? Many people can’t simply get rid of family heirlooms but don’t have room for them in their studio apartments. We hate to say it, but to storage they go.
Self-serve storage provides a large locker-type space to store household items, excess business supplies, etc. Leasing this type of space provides the landlord with a steady “rent.” The concept requires little maintenance while delivering a high return. The model will stand the test of time and survive through different economic cycles.
Conclusion
The high cost of construction can be a driving force behind why many of these uses prefer to look toward existing vacant buildings as opposed to new construction. A city may lose a retailer, but in many ways, this creates an opportunity that wouldn’t have otherwise existed for another user.
An owner looking to revive a shopping center must work with their team of property managers and brokers to find the best alternative use for the vacant space. Change is never easy, but if done right, it can pay off greatly.