Lost in Space-As Retailers Shut Stores, Empty Retail Space Is Problem for Some Communities

For many suburban
communities, space could be the final
frontier.

By Catherine Valenti ABC News

Space right here on Earth, that is. Last week’s announcement
that Kmart plans to shut 284 stores is just the latest in a series
of retail closings in recent years that have left gaping holes in
many economically struggling communities.

Often located as one of the anchors in a strip mall or an older
shopping center, the wave of empty big-box storefronts from
defunct or bankrupt discount retailers like Montgomery Ward,
Caldor, Ames Department Stores, Bradlees and Service
Merchandise can bring about the rapid decline of a once
vibrant shopping center.

But this wave of empty retail space is also forcing many
communities to rethink the whole concept of the strip mall and
develop new uses for the void left behind.

"I see this as one of the prime opportunities to repair the
suburbs," says Peter Calthorpe, principal at Calthorpe
Associates, a Berkeley, Calif.-based urban design firm that
specializes in developing pedestrian-friendly, mixed-use
communities.

Stripped Down

Once an anchor store has left a strip mall, other smaller
tenants often see a sharp drop off in foot traffic and sales if
it’s not replaced with another retailer. This can lead to a loss
of jobs and sales tax revenue, which depletes the local
communities’ coffers.

Sales tax revenues from shopping centers contributed almost
$47 billion and 10.6 million jobs to local communities in 2000,
according to the International Council of Shopping Centers, a New York-based industry group
also known as the ICSC.

The difficulty in replacing these spaces sometimes lies in their size. Older shopping centers and
strip malls built in the 1960s are becoming obsolete for the new vanguard of big-box retailers
that are commanding even larger spaces. Wal-Mart and Toys ‘R Us, to name a few, are among
the retailers shutting smaller stores to move to larger premises that suit their ever-expanding
formats.

To be sure, some of these abandoned locations in prime locations are often easily leased to
other retailers. But stores that are located in economically troubled areas often lie empty for long
periods of time, leaving a gaping hole in the middle of a once prosperous commercial center.

"When new stores are built, other commercial areas are forsaken. It’s all part of the sprawl
problem," says Marya Morris, senior research associate at the American Planning Association, a
Chicago-based nonprofit public interest and research organization involved in urban and rural
planning issues.

Cinderella Story

The Cinderella City Shopping Mall in Engelwood, Colo. is one example of a shopping center
whose time has come and gone. Opened in 1968 with 275 shops, 7,000 parking spaces, and
two miles of shopping area, the complex was once the biggest shopping center west of the
Mississippi.

The center prospered for a while, by 1974
contributing $2.2 million, or 52 percent of the
city’s sales tax revenues. But heated
competition from larger, more modern centers in
surrounding areas caused the mall to stagnate
in the mid-1980s.

"Consumers really like what’s new bright and
shiny," says Robert Simpson, Englewood’s
community development director. "They flock to
the most newest retail experience they can go
to."

The city started holding community meetings in
1994 to determine what should be done with
the site, which had lost many of its stores. By
the time the center’s last tenant, Montgomery
Ward, moved out in 1997, the city had acquired
the shopping center and set out to work the
following year demolishing the mall to transform
it into a new development that would integrate
retail, office and residential housing, all
connected to downtown Denver by the RTD
light rail system.

"This is a very middle-income, blue collar
community," says Simpson. "They wanted a
place that met more of the community’s needs
on a long term basis."

Once it’s completed in June, the site will have
438 residential units, 40,000 square feet of
office space, a civic center, restaurants, health club and 460,000 square feet of retail space.
True to the current big box trend in retail, one of the first retailers to go in will be a 130,000
square foot Wal-Mart. And if that retail craze goes out of vogue, Simpson said the stand-alone
structures offer an easy solution.

"This property allows for redevelopment of single sites very quickly," he says. "If Wal-Mart
becomes a passing trend, we can knock it down and replace it with smaller retailers or other
users."

Malls to Mews

Other communities have followed suit. Calthorpe Associates completed a project in 1998 called
The Crossings Transit-Oriented Neighborhood in Mountain View, Calif. in which the firm turned a
1960s strip mall into a community that puts single-family homes, townhouses, row houses, and
apartments within a short walk of shopping and a CalTrain commuter station.

In Chattanooga, Tenn., developers are transforming the Eastgate Mall, a vintage 1960s shopping
center, into a town center built on gridline streets filled with private residences, restaurants,
stores and businesses.

"What we’re hoping for is that as some malls go out of business, communities choose to use
them for more community serving purposes and not just say, ‘We’ll give huge tax breaks to get
retailers to move in,’" says Steven Bodzin, communications director for the Congress of the New
Urbanism, a San Francisco-based non-profit organization which promotes the reconfiguration of
sprawling suburbs into walkable, neighborhood communities.

Not Dead Yet

But not everyone is quick to proclaim the death of the strip mall. Though some communities do
have the problem of recycling empty retail space, the strip mall format represents 45,000 of the
nation’s shopping centers compared to only 1,200 enclosed malls, according to the ICSC.

And while 69 percent of 1,410 store closings in January — almost double the 793 closings that
occurred in January a year ago — were located in strip mall centers, the ICSC says over half of
those closings were due to the bankruptcies of Kmart and Service Merchandise.

ICSC spokesman Malachy Kavanagh says he expects the current 6.7 percent vacancy rate in
shopping centers to climb to 7.3 percent by the end of the year, but notes that any vacancy rate
below 10 percent is considered comfortable by the industry standards.

"There will be excess supply as a result of the store closings, but it will be absorbed by the
market," predicts Scott Onufrey, vice president for investor relations at Kimco Realty, the nation’s
largest owner and operator of neighborhood and community shopping centers which currently
leases 75 locations to Kmart. "It’s not as bleak as some would make it out to be."

ICSC’s Kavanagh agrees, saying that while store closures are an unfortunate part of the retail
business, he expects successful retailers like Wal-Mart, Kohl’s and Target to pick up where the
older retailers left off.

"If you’re a landlord, you really don’t want to have a tenant who’s not driving shoppers into your
center," says Kavanagh. "In that respect many in the industry would look at it as a positive."

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