Existing space in strip malls not always desirable

FORT WAYNE, Ind. (WANE) - Many strip malls all around Fort Wayne are full of empty windows and signs advertising available space. Yet, brand new buildings keep popping up.

"It seems like it shouldn't make sense," Steve Zacher, the president of The Zacher Company , said. "But, the fact is the economics work for the best locations where you can pay premium prices for land and get premium rents while at the same time, another property not very far away, you can barely give it away."

When a builder has the money and the desire, there's not much to stop another strip mall from going up.

"Obviously we'd like to see the re-use of existing spaces for sustainability and environmental reasons, but we don't have much control over that," Ashley Steenman, the vice president of business development for the Fort Wayne-Allen County Economic Development Alliance , said.

The philosophy behind the building really comes down the old adage, "Location, location, location."

"They're not going to pay a little less in rent to be in a secondary location. It doesn't work that way," Zacher said. "In fact it works the opposite. They'll pay a premium to be in the best location."

The Zacher Company, a commercial real estate agency, just released its latest assessment of the retail market in Fort Wayne. It found the total retail vacancy in the city went down slightly from last year. 

But, it's not good news for many existing strip malls. The assessment predicts that next year leasing activity will be limited to the most popular shopping centers, and the "B" locations will see rent rates continue to fall.

"The second generation buildings that don't have prime locations [are] very challenging to fill," Zacher said.

To meet that challenge, the city of Fort Wayne developed Economic Development Target Areas (EDTA) in places where empty retail space is struggling to be filled.

"The city of Fort Wayne's taken a fairly aggressive stance toward all the retail areas, not just big boxes," Greg Leatherman, the city's director of redevelopment, said.

In part one of "The Big Empty," NewsChannel 15 learned why it can be a struggle to find new tenants for large big box stores. Click here to see pictures and background of the vacant big box properties on Zacher's list.

The Economic Development Target Areas give new businesses a break when it's trying to get started.

"Tax abatement for retail is usually not an option," Leatherman said. "Start up costs are usually greater than ongoing operations, so that helps them get going."

A company moving into an available retail space in an EDTA could get a grant to help fix cosmetic issues and property taxes on any improvements increase over time instead of all at once. But, government can only do so much.

"At the end of the day, it's the private sector that must step up and that's what we have to count on with these buildings," Leatherman said.

Zacher also predicts construction on new strip malls will slow down, which could help existing real estate find new life.