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Empty boxes
By MARK ALBRIGHT, Times Staff Writer Within two weeks Kmart will release The List, identifying hundreds of stores across the country that the failing discount chain will close this summer as part of its bankruptcy reorganization plan. Purportedly leaked versions of The List keep surfacing. Local leasing agents have seen as many as three different ones. And the shopping center landlords whose tenants include Kmart are shopping for replacements, just in case they are about to be stuck with an empty store the size of three football fields.
The grim business climate for retailers this winter has translated into equally tough times for their shopping center landlords. Nationally, retailers have announced the most store closings in a decade this year. In the Tampa Bay area, the arrival of two new regional malls has meant more space has been added than filled in each of the past three years. As a result rental rates in the bay area are flat to down slightly, and leasing agents are freer with concessions. Meanwhile, most retail chains have dramatically cut expansion plans. Chains that build the "big box" stores that anchor many shopping centers are tightening their belts the most. "It's getting ugly out there," said Craig Sher, president of the Sembler Co., a St. Petersburg shopping center developer. All the additional empty space will add a couple of percentage points to a vacancy rate among bay area shopping centers that is fast closing in on 13 percent, which would match the worst of the 1992 recession and hangover from the savings and loan crisis. According to a survey in the November Maddux Report, the shopping center vacancy rate in Pinellas County was 10.7 percent. In Hillsborough County, it was 9.2 percent, and in Pasco County, it was 12.1 percent. That doesn't reflect the Service Merchandise, Jacobson's and Kmarts stores that are about to be vacated. "With so many more empty stores coming on the market and fewer chains to rent them to, what's already been a real challenge is going to get much harder," said Suzanne Chen, president of Tampa's Retail Realty Group, one of the go-to people big box retailers and their landlords use to fill vacant stores. "We used to have about 50 chains to pitch. Now it's more like 25." * * * Nearly every neighborhood seems to have one or more shopping center carcasses, empty retail relics that may stay that way for years. Some of these eyesores represent a retailer that failed or cut back dramatically to stay alive. Fowler Square Plaza on Nebraska Avenue at Fowler in Tampa is the hub of a sprawling retail dead zone covering almost 300,000 square feet in the neighborhood. About the only occupied spots left are the Peddlers Flea Market located in a vacated Kmart, a medical office and a former Bob Evans restaurant repainted to house EZ Pawn. Around the corner on Fowler is a Service Merchandise that's about to go dark. Dead centers plague even strong markets. In Brandon, for instance, Brandon Crossing on State Route 60 at Faulkenburg Road is only 15 years old. But it has huge empty spaces that once housed the defunct Waccamaw HomePlace and Roberds as well as a Sports Authority that moved out for cheaper space at a defunct JumboSports 2 miles away. Failing chains aren't the only problem. Nationally the retail industry has been overbuilt for decades. That's because retailers, determined to show Wall Street ever-increasing sales, usually do so by opening more stores. The nation has 20 square feet of retail shopping center space per person, up from the 12 square feet of 1980, according to the National Research Bureau. In Florida, where strip shopping centers have been a principal mode of development for 50 years, there's 26 square feet of retail for every resident. So dead shopping centers or those pockmarked with gaping holes have become a familiar part of the landscape over the past 20 years. "You're only beginning to see the impact of all this over-retailing," said James A. Moore, an architect and urban planner with HDR Engineering in Tampa. "Some centers can be leased back up, some can be redeveloped into something else, but a lot of them are obsolete and will have to be scraped clean."
Many centers are redeveloped to regain their competitiveness. But because cities have zoned far more land for commercial use than their population can support, sooner or later many vacancies are impossible to fill. Redeveloping an old center costs as much as 50 percent more than building a new one on vacant land and takes far longer. "Unfortunately, the American development pattern for the past 50 years has been to soil the nest and move on," said Michael Beyard, senior fellow at the Urban Land Institute in Washington. "You cannot blame just the developers and retailers. Cities made a blood sport of building their tax bases by competing for retailers with strip commercial zoning when they should have been clustering retail and encouraging mixed-use projects. The idea of downzoning is almost impossible. You also have to credit the American consumer for constantly demanding change." Grocers remodel and move stores every five to seven years for fear of losing shoppers to a newer rival. "We've redone 20 empty grocery stores by cutting them up into smaller stores," said Susie Levin Rice, president of RMC Konover Property Trust in Tampa, which owns and manages shopping centers. Shopping centers took a huge hit when drugstores began moving to free-standing stores by highways. Walgreens, Eckerd Drug and CVS have done that more than 200 times in the bay area in the past five years. That alone emptied enough space in local shopping centers to fill WestShore Plaza twice. * * * Don't assume, though, that some landlord is desperate to find a tenant for that vacant barn of a store you drive by each day. In some cases, the departed tenant still is paying rent. Kmart is paying for its empty store in Largo, not to mention the former Largo and Pinellas Park locations of its defunct Builders Square chain. One of Kmart's first acts in bankruptcy was to ask a judge to rip up the leases for 350 shuttered stores that are costing it $250-million a year. Kmart spokesman Steve Pagnani said the chain has been paying rent on empty stores mostly "because we cannot find anybody to take the space." Paying base rent for empty space is "fairly common" in shopping centers, said Tom Dwyer, managing partner for retail at REIS Research in New York. "Usually it's to keep out competitors." Consider what appears to be an abandoned Temple Terrace shopping center on 56th Street at Bullard Parkway. Eckerd left to move across the street. Publix Super Markets moved to a redeveloped center a block away because the landlord could not offer space for the old Publix while a replacement was built next door. Both Publix and Eckerd are still paying base rent to keep rivals from taking the space they vacated. "I could get another grocer and drugstore in there right now, but I'm hung up with those leases for another 18 months " said owner Charles Bickimer, who spent much of the past decade refilling his Britton Plaza in South Tampa. "Shopping centers are still a very good business, if you know what you are doing." Other Tampa Bay commercial landlords agree. Failed retailers who occupied good, high-traffic locations have proved relatively easy to replace. Home Depot has acquired the former Montgomery Ward & Co. store at Crossroads Shopping Center in St. Petersburg. Burlington Coat Factory and Beall's have snapped up smaller Wal-Marts and Home Depots and Roberds that were vacated. Liquidators say they have 80 prospective tenants lined up for the 220 Service Merchandise stores nationally that are about to be vacated. Developers are likely to count on retailers such as Wal-Mart Supercenters, Costco, Home Expo and Super Target to shoulder some of the redevelopment burden at the shuttered Clearwater Mall and at Tampa Bay Center in Tampa. Chen found success turning vacated Scotty's stores into ministorage warehouses, including one in Seminole. "I've got several people lined up for the old Waccamaw HomePlace in St. Petersburg," she said. "But they all want to cut up the space into smaller pieces." David Conn, senior vice president of retail for CB Richard Ellis in Tampa, said the bay area remains a healthy market overall because the population is growing. "The A-plus sites are still A-plus sites," he said. "Space will be taken up by chains that want to become more entrenched. Real estate that cannot be duplicated is still very good dirt." -- Mark Albright can be reached at albright@sptimes.com or (727) 893-8252.
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From the Times Business report
From the AP
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