Bye Bye Department Stores, Hello Mixed-Use And Entertainment Hubs
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The mass consolidation and closure of top department stores has not only left billions in CMBS loans at risk, but also left landlords wondering what to do with the empty 50k SF to 200k SF big-box space left behind.
While vacant big-box space is seen as a waste of square footage that eats into profits and can hurt traffic, reworking vacant big-box space for reuse can be expensive. If handled right, it can also prove quite profitable, Colliers International USA national director of retail services Anjee Solanki tells Bisnow.
“[Landlords] are taking big-box spaces and looking at a multi-tenant approach. The more storefronts you have in a project, the more reasons you’re creating for the customer to shop at your project,” Anjee says. “I don’t think it’s a bad thing, as long as it’s in a market where you’re seeing continued growth, movement and demand from customers wanting more storefronts.”
Anjee discussed two innovative ways landlords are reusing empty big-box retail space.
1. From Brick-And-Mortar To Mixed-Use
One thing we’re likely to see more of in prime markets is the complete redevelopment of big-box space for mixed-use, particularly in more urban locations. For mixed-use projects, those former multileveled anchors are great for bringing retail to the first floor and developing multifamily space up top. “You’re going to see more of those larger projects where you have higher density,” Anjee says.
Though she says to keep in mind that reworking a space previously zoned for retail to multifamily comes with challenges, including rezoning hurdles and entitlements, and working with the community to ensure the renovations will enhance and not take from the neighborhood.
2. Multi-tenant Shopping And Dining
“We’re also seeing a lot of single tenant buyers out there doing some cool things. They’re taking these big-box spaces and adding quick-service restaurants,” Anjee tells us.
The large buildings can easily be converted for multitenant use, with a large percentage reserved for soft goods users and four to five restaurant tenants, and Anjee says this form of adaptive reuse is a lot less of a risk for landlords. This array of tenants in particular are great at generating cross-shopping traffic and are known for paying healthy market rents.