Cities face challenges reusing retail space

FORT WAYNE, Ind. (WANE) – Driving around Fort Wayne, it isn’t too difficult to spot a building that’s available for sale or lease. The signs fill windows and park strips all over the city.

“Having those empty buildings, it doesn’t always look good,” Ashley Steenman, the Vice President of Business Development at the Economic Development Alliance , said. “It creates blight. You don’t want to see it be a catalyst for other buildings nearby to go empty as well if retailers think that area is going downhill."

The latest retail market survey released by The Zacher Company , a commercial real estate agency, found the percentage of available retail space in Fort Wayne is actually slightly lower than last year at 17.2 percent compared to 19.5 percent. But, it’s still higher than 2008-2010.

“There are more buildings available today than five, ten years ago,” Steve Zacher, the agency’s president, said. “The functions of retail concepts change and what was functional and effective many years ago is no longer what they need to have today.”

The retail boom years ago also is contributing to the decline in big box stores now.

“There’s been an overbuilding of retail across the country and that has contracted over the last five years or so,” Greg Leatherman, the director of redevelopment for the city of Fort Wayne , said. “It’s about a customer walking in the door and paying money for their products. If none do, then they close down.”

The Zacher Company has 18 locations around Fort Wayne on its list of “big box” vacancies. Those buildings are all 20,000 square feet or more. Of those 18, 12 are more than 50,000 square feet.

“Some of those buildings have been on the market for many, many years. It’s very challenging in many cases,” Zacher said.

Click HERE   to learn more about the big box retail spaces on Zacher’s list.

Challenging Solutions

Filling those big empty spaces isn’t easy. It often takes a little creativity.

“In many cases, the conclusion is to have to go to an alternative use. It’s no longer going to be a retail use even though the fundamentals of the location are still good for retail in terms of population, demographics, traffic counts and visibility, in many cases those fundamentals are fine, but there isn’t the demand out there,” Zacher said. “In some cases, those buildings need to be demolished and then redevelop the site for a new use.”

A good example is the former Kroger grocery store on the corner of E. State Boulevard and Spy Run Avenue.  The building will now become high-end climate-controlled storage units.

The possibilities could be endless, but it takes a developer with a vision beyond the bricks to make it happen.

“Call centers for example,” Steenman at the Economic Development Alliance said. “There are creative developers able to turn big open spaces into office space or cubicles.”

John Elliott, public affairs manager for Kroger , said he’s seen former grocery stores turn into all kinds of new use.

“People focus on the temporary time when a building’s empty and don’t focus on the new opportunities it creates for new business, schools, healthcare or even government organization,” Elliott said.

Kroger Contribution

Empty Kroger or Scott’s stores account for five of the 18 big box locations vacant in Fort Wayne.

“We needed to align where our stores were with where our customers needed them to be,” Elliott said. “It’s just a necessary part of the retail process if you want to keep pace with customer expectations and where those customers physically are.”

That realignment included building two new, larger Marketplace stores and updating and expanding several other locations.

“Overall in the Fort Wayne market, Kroger’s made one of its largest investments in the country,” Elliott said.

Kroger’s lease on the former Scott’s location on Dupont Road ended in November 2011. It’s now up the building owner to find a new tenant.

The Scott’s store on North Anthony Boulevard, which just closed earlier this year, is not available for a new tenant. Kroger resolved its lease with the building owner, but the property has to have structural repairs done before another business can use it.

“It reverted to the building owner to resolve. We can’t use the building and we can’t lease a building we can’t use,” Elliott said.

Kroger just sold the former Scott’s on Decatur Road just sold in October. Elliott didn’t have any information on the new owner or what will happen to the property.

Kroger also owns the former Scott’s on Maplecrest Road and the former Kroger on U.S. 24. Both of those locations are currently for sale.

“We’ve had quite a flurry of inquiries,” Elliott said of the newly-available lot where Kroger sat.

Elliott is confident all the former grocery stores will find new life.

“It’s very unusual a store would not find some new tenant,” he said. “As each of those finds new purpose, it’s pretty unusual there isn’t at least some rehab or remodel work, so there’s a whole second wave of work for local construction

and contractor firms too.”

Leasing Hurdles

Of the 18 big box locations The Zacher Company lists as vacant, three are for sale and one sold in October. The other 14 are all for lease.

“The fact that it’s only available for lease could be an impediment. That is if the owner was more flexible, they’d find users. There might be people that would buy a certain building, especially if the price was right, but if they know they can only lease it, that’s an impediment,” Zacher explained.

Sometimes the owner of a leased property also isn’t motivated to move in a new tenant.

“In many cases [the former tenant] is still paying rent, so the motivation by the building owner isn’t quite as strong to aggressively look for a replacement until that lease runs out,” Greg Leatherman, the director of redevelopment for the city of Fort Wayne said.

While the challenges can seem daunting, Leatherman said Fort Wayne isn’t alone.

“Many places are much worse. It’s just a statement of the times, not an indictment in any way of the city of Fort Wayne,” Leatherman said. “Too much retail was built at a particular time for dollars chasing the product and there’s a contraction, so there’s some stores available out there. But, in no way do I think Fort Wayne has an overabundance compared to markets our size or bigger. I think we’re in better shape than a lot of cities.

How Fort Wayne Stacks Up

NewsChannel 15 did a search of available retail space on the listing website showcase.com for Fort Wayne five other cities. The cities were of similar, smaller and larger size:

South Bend, IN: 101,000 people
Dayton, OH: 142,000 people
Jersey City, NJ: 250,000 people
Fort Wayne: 256,000 people
Henderson, NV: 260,000 people
Indianapolis: 827,000 people

When looking at the number of vacant spaces 20,000 square feet or larger per 100,000 people, Fort Wayne had seven buildings.  Jersey City and Henderson are closest to Fort Wayne’s population and both are fairing much better than the Summit City when it comes to large retail space. Jersey City had one building per 100,000 people and Henderson had three.

But, in the Midwest, Fort Wayne is stronger than South Bend and Dayton, Ohio. South Bend’s search found 13 big box buildings vacant per 100,000 people and Dayton had 19. Indianapolis had five buildings.

See the full search results at the bottom of this story.

“We shouldn’t interpret [the empty stores] as a phenomenon that’s specific to Fort Wayne. That’s true across many communities, in fact most communities,” Zacher said.

Success Stories

Fort Wayne may still have a lot of available signs around town, but there have been some successes in filling empty space.

A DSW just moved into the old World Market building on Coldwater Road and, as earlier mentioned, the former Kroger on Spy Run Avenue is becoming a storage facility.

Costco is also coming to town. While it’s not moving into one of the empty buildings, Zacher said it’s still a win for the retail community.

“Costco has a specific footprint need and certain size site for a certain size building and parking lot. So, it was very clear when Costco came to town there was not going to be an existing building they could retrofit,” Zacher said.

While Costco might not have been the right fit for any available stores, Leatherman said just because one retailer failed in certain location doesn’t mean another one will never move in.

“Good retailers, national retailers, know exactly the census data and other marketing data like how many cars drive by the place, what the average income is, what they’re spending their money on,” he said. “They’re very good at understanding the people who live one, three, five miles from those buildings. I don’t think they look at that and say just because the other business didn’t’ work there, mine won’t because they’re probably selling different products to different people.”

Kroger is one of those national retailers that run comprehensive data.

“We’ve got a pretty solid data analysis capability and monitor things,” Elliott said.

Despite what perception some empty buildings might give, Elliott said Kroger thinks Fort Wayne’s market is solid.

“The Fort Wayne economy is vibrant and growing and we are with it,” he said.

Leatherman agreed.

“I think we have a fairly healthy retail market in comparison with other cities our size. I think we’re doing a lot to help when the economics of the building make sense,” Leatherman said.

City Lends a Hand

Fort Wayne is working hard to make it easier for a new business to move into an old, empty retail location.

“The city for Fort Wayne has taken a fairly aggressive stance towards all these retail areas, not just big boxes,” Leatherman said.

All around Fort Wayne, the city has designated Economic Development Target Areas . Empty store fronts in those locations come with incentives for a new tenant to move in.

“Tax abatement for retail is usually not an option,” Leatherman explained. “We’re there on the front end to help. Start-up costs are usually greater