The Chaotic, Fractal, and Complex City: The implosion of cities

The Chaotic, Fractal, and Complex City: The implosion of cities

Repurposing Commercial Big Boxes - Feedback

 In response to my question "Does anyone have good examples of big-box retail retrofits?" (posted on an APA discussion board), John Woods writes --
 
What is your standard for "good"? If you are looking for cutting edge design excitement or trendy new-urbanist lifestyle centers, then no, I don't know of any. However, if restoring a strip mall to full occupancy with vibrant businesses counts, you could look at Peachtree Plaza in Hammonton, NJ. A Jamesway department store and an Acme Market both closed after a Wal-Mart and a larger Superfresh Market opened across the street. When Shop Rite Markets came to our economic development office looking for a greenfield site to develop a new store in our town, we directed them to the owners of the old strip mall and pointed out the real advantages of retrofitting the old department store. While the space was no longer viable as a discount department store, it proved to be perfect for a larger grocery store. With the presence of a new and competitive anchor tenant, the remaining spaces, including the old Acme Market space, were quickly rented out to an appropriate tenant mix. A portion of the back of the old Acme Market space was subdivided for use as a call center for a computer tech support firm. They needed cheap but clean space without any walk-in traffic. That back portion of the building was perfect and that reduced the size of the remaining market space making it more appealing to mid-sized retailers like Advance Auto Parts.

Sometimes the best answers are simple but effective. By re-positioning the center with a grocery store anchor rather than a discount department store, it made all the difference. Some minor facade improvements and addition of a new restaurant on a small out parcel completed the package with minimal demolition and reconstruction expense. It increased traffic not only in Peachtree Plaza, but also at the new Wal-Mart across the street. With a larger critical mass of businesses, customers would come from longer distances to shop in the area. Peachtree Plaza is located at 80 S. White Horse Pike, in Hammonton, NJ.

John Woods runs the consulting firm Revival by Design focused on design-based economic development, revitalization master planning and community visioning. 

Al Jones adds the following: 

We've seen them used for data center, call centers, physician-owned outpatient clinic, government offices, furniture stores, a 63,000 sq. ft. pawn shop that needed the display space, antique mall (home-based dealers rent space within), carpet store (again flooring demands a lot of space), light manufacturing (that was a surprisingly easy transition and then sold portions of the vast parking lot to fast food outlets to pay off the building mortgage quickly), and as John points out retailers growing beyond traditional sizes into what could work in the big box location like grocery, specialized grocery, craft and fabric shops (one took 100,000 sq. ft. and has made it work quite well.)

They'd work very well for dividing into classrooms for higher ed or K-12 for that matter and have the power supply, lighting, parking, and finishes in place so you're looking at throwing up some interior walls, more power distribution maybe, WI-FI, fiber optic cabling connection maybe, and expanded lavatories so dramatically cheaper, probably 10-15% of the cost that education looks at with buildings when I've run the numbers on it but almost immediately out of consideration by educators, who remain the least practical group I've ever run across in facilities management and planning. It'd solve a lot of overcrowding or need for lab space for technical training compared to $170-300 sq. ft. new construction on high cost land over 3-10 years that's considered the standard solution.

Re-purposing Commerical Big Boxes

The Geneva School

Full Sail University

In Central Florida it looks like various educational institutions are the new primary users of vacant big boxes.  Here are a few specific conversions:

The Geneva School: A non-profit Christian Classical School, grades pre-K through 12, occupies a 40,000 s.f., former sporting goods store. 

Herzing University: A for-profit post secondary school offering bachelor's and associate degrees in a  33,600 s.f. former Bally fitness center.

Aviation School of Maintenance:  First located at the Orlando Executive Airport in 2006, AIM moved to its new location on U.S. 17-92 in Casselberry in 2011.  The company acquire and re-purposed a foreclosed Saturn Dealership.  The showrooms were converted in to new administrative offices and classrooms while the car maintenance bays were demolished and a new larger hanger added for hands-on lab experience.   Total space in the new school is 42,000 s.f..  Classrooms and administrative space approximates 24,000 s.f. and the hanger is 18,000 s.f.

Full Sail University: This for profit, premier art music and film school wins the award for corridor retrofits.  They arrived in the Orlando market in 1998, beginning modestly in two office buildings on University Boulevard constituting almost 250,000 s.f. of building space.  Today, the Full Sail Campus has grown to over 212 acres and has consumed two additional major shopping centers, adding 266,500 s.f. and a sea of surface parking to accommodate this 24-hour school.

Prior to the take over by Full Sail, both commercial centers were struggling to maintain occupancy.  One had as its major tenants, Waccamaw Pottery and Stein Mart.  The other was anchored by Albertson's grocery and Books-a-Million.  While appearing strong during the period 1998-2002, most of these anchors were in serious trouble.  Albertson's has since pulled out of Florida.  Book-a-Million, while not technically out of business, continues to struggle like its dead brother Borders Books.

Full Sail University has been a major economic boom for Orange County, maintaining a strong tax base on these properties while providing significant base employment to the area.  This school has been such a success, I intend to allocate a full future blog posting to its story.

Lessons Learned
Conversion of big boxes and entire shopping centers using the existing buildings is an cost effective solution for the right institutional uses.  After all, of the infrastructure is in place and the vertical construction is completed.   Be proactive and revise the zoning code to allow for schools in you general commercial zoning categories.  From a tax-base position, the for-profit schools are ideal, while the non profits will remove the property from the tax base.  And finally, as large big boxes retailers continue to downsize there store sizes (See "The Dying Commercial Corridor"), they are going to need to establish stock warehouses for quick deliveries to their smaller retail outlets.  Conversion of the existing vacant retail big box to a stock warehouse may be an easy conversion. Though again from a tax base position, they will not return as much in taxes to the local government as the original tenanted use.  An occupied warehouse is certainly better than the vacant space or conversion to non-profit schools. 

Have You Seen Other Successful Conversions of Big Box Retail?  Post it here and let us all know.

.

The Dying Commercial Corridor

Strip commercial corridors are dying and market forces are the cause.  For decades government planners have zoned road frontage on every major arterial road and many if not most collector roads for general commercial development.  The private sector has responded by building every size commercial center from stand alone single-use buildings, and small multi-tenant centers, to excessively large power centers and lifestyle centers. Two examples illustrate the scope of the problem.

Las Vegas
According to Vegas Inc. the retail vacancy in Las Vegas is in excess of ten percent.  A glut of new space was built during the boom forcing major drops in rents causing aged centers to be completely abandoned. In this market, John Stater,research director at Colliers International Las Vegas. estimates a 20-year recovery period.  That recovery includes demolition of many obsolete buildings and even some newly built products.

Suburban Orlando
In Central Florida, State Route 436 is a major 6-lane arterial that connects Orlando International Airport to Interstate I-4 and passes through three cites including Orlando, Casselberry, and Altamonte Springs. Here the problem is even worse. One three-mile stretch has 1,077,215 square feet of commercial space.  As of April, 2012, over 230,000 square feet (21%) was vacant.

Trends
Some might contend that with the natural recovery of the economy this space will once again fill up with productive retail businesses.  Unfortunately, retail trends suggest otherwise. The entire nature of retailing has changed.  The demise of Circuit City, Border Books, Tweeter, and Crazy Eddie are the canaries in the coalmine.   Following them are those that are trying to adapt to avoid their own demise including Sears, Best Buy and K Mart.  Best Buy has adopted a new business model focused on smaller stores selling cell phones, and tablets.  The plan is to roll out 600 to 800 of these smaller stores by 2016 but industry experts openly wonder if its too little, too late.

One major structural change is, of course, on-line retailing. Sales from online retail is projected to continue to grow at a 10% compound annual growth rate through 2015 reaching $215 billion in sales. According to the US Census Bureau, for the second quarter of 2012, total retail sales were estimated at $1,077 billion.  On that total, e-sales constituted $51.2 billion or 5.1% of total sales.  This is a 15.3% increase over the same quarter last year.  The most popular products sold through e-sales include digital content and subscriptions, computer software, consumer electronics, jewelry and watched and event tickets.

Further exacerbating the glut of retail spaces on suburban corridors is the cannibalization of boutique retail by discount retailers, lead by Walmart. Much research has been done on this.  One such report completed by Elena Irwin, a regional/community economist with the Ohio State University Extension Service found that an average of four small retailers shut their doors following the opening of a new Walmart or K-Mart.  Another researcher found that the major expansions of Walmart in the late 1980's through the 1990's accounts for 50% to 70% of the decrease in the number of small retailers across the United States.  These stores will not return and commercial centers built to house them will continue to be predominantly vacant.

Watch for future blog posts for discussions on ideas for repositioning corridor properties.