Tag: e-commerce

The large, vacant structures loom over many empty parking lots dotting retail landscapes throughout the Greater Lehigh Valley. They are the former homes of Kmart, Sears and BonTon.

The once thriving big-box retailers are now desolate spaces marked with inactivity that stretches into months and even years. They beg the question, what do we do with these large, vacant spaces?

While they appear to be eyesores of a bygone age, the land they occupy is valuable for reuse as something.

While brick-and-mortar retailers struggle with declining foot traffic and sluggish sales thanks to online competition, the physical store is far from dead.

But as more and more of these large-footprint stores fade from the retail landscape, their replacements will look a little different. Some may be rezoned for industry, others could become parks and green space, and some will be reborn for retail use in a more specialized or entertainment-focused manner.

“I think the shopping centers in the valley that have Kmarts and other large [vacancies,… are going to get downsized,” said Steve Cihylik, a broker for Howard Hanna The Frederick Group of South Whitehall Township. “You can’t retool them because of the dimensions. You can’t multi-tenant a box like Kmart or BonTon because of the size of it.”

This opens the potential for new uses that can include Amazon opening grocery stores or companies acquiring space to cook food for several restaurants for delivery to consumers, he said.

“With the increase in food delivery, there are companies opening up a kitchen and cooking for five or six restaurants,” Cihylik said. “There are restaurant groups that have a separate kitchen producing products only for delivery. These are all potential candidates for a ‘pad site,’ a portion of a site.”

 

Starting over

For empty big-box sites, developers would likely turn to the wrecking ball and build something new because it’s too difficult to reuse them, Cihyik said. Then developers can create entertainment and retail centers similar to what the owners of the Lehigh Valley Mall did. They added a Bonefish Grill, an Apple store and several other tenants that are separate from the mall, but close by.

For the Phillipsburg Mall, which has seen a large number of tenants vacate, including major anchors, Cihyik envisions some light industrial uses going into the indoor mall,.

Developers are becoming more and more reluctant to build large retail stores because of the expense of real estate, and the time-consuming process of getting the plan approved, he said. The land under those old retail sites becomes more valuable every day because it’s already an approved use, he said.

“It takes years,” Cihylik said, noting it took eight years for Hamilton Crossings to see the light of day.

That project, which opened in 2016, involved the construction of a massive shopping center in Lower Macungie Township, that includes nearly 560,000 square feet of retail space.

 

Thinking outside the big box

These outdoor malls, sometimes referred to as lifestyle centers or power centers, differ from the traditional indoor malls and appear to be doing better. Hamilton Crossings may include familiar department stores such as anchor tenants Target and Cosco, but it also has restaurants, Whole Foods and pedestrian paths that encourage walking.

Tim Harrison, who developed Hamilton Crossings along with The Goldenberg Group, said there is a range of options when considering what to do with large, vacant retail sites.

On one end of the spectrum, developers often repurpose an old retail use with a new retail use, or they could demolish the old structure and build a new space, such as multi-family homes or townhouses. A former department store could become home to a large food store.

“There are all kinds of options within the spectrum,” Harrison said. “A lot of what you see is space repurposed.”

Vacant department stores often find new life as space for entertainment, such as indoor athletic fields, miniature auto race parks, trampoline parks, climbing gyms, or indoor soccer fields, he added.

“The space might be divided into smaller spaces such as a food hall or a series of restaurants,” Harrison said.

Sometimes, these buildings become houses of worship, or health care and educational facilities. Another option is back offices for large companies, he added.

“As the internet becomes an ever more popular tool for facilitating retail sales, it’s become painfully obvious that we are substantially overbuilt from a retail standpoint,” Harrison said.

There is still demand for large retail stores but in very limited locations, he added. This is true for underserved areas, such as food deserts, communities with less affluent populations where people cannot easily access a grocery store.

“You have a substantial number of areas in neighborhoods that are underserved with grocery stores,” Harrison said. “The economics of operating in areas like that are difficult. It’s hard to make the numbers work. One solution is government and community support.”

Another example would be an affluent area where the barriers to new development are very high. In those cases, a retailer looks for years for a location and just cannot find one.

 

With closings come opportunities

Despite the ability of developers to find new uses for older, vacant retail properties, online shopping will continue to increase store closings, both big and small.

“The more that a particular retailer is selling what you could characterize as standard merchandise, there’s less reason to leave the comfort of one’s home,” Harrison said.

The retail sector is in an exciting time, said Jody King, first vice president of CBRE, a real estate firm in Upper Macungie Township. King represents property owners and tenants in retail centers, land development projects and medical office buildings. She sees retail spaces adapting to changing needs.

“People have to kind of reinvent themselves,” King said.

People of all ages who visit bricks-and-mortar retailers are looking for creativity and experiences, she added.

Medical use is a type of tenant King sees frequently taking over vacant retail spots.

“Most shopping centers were planned for high traffic, easy access, heavy parking, and the retail centers definitely have that mix,” King said. “We are also seeing gyms; we are also seeing things that you can’t necessarily get online.”

When considering how to reuse a large retail center, a building will often be divided up so that more than one tenant can take up the space, King said. This strategy allows retail centers to attract more people because of the diverse offerings.

She also doesn’t see traditional retail bricks-and-mortar sites disappearing entirely. Nordstrom recently opened a store in New York City, and stores such as Target offer online merchandise pickup at their stores.

“I think the Lehigh Valley has really done a great job adapting to what people need,” King said. “Landlords have to be adapting their shopping centers to bring in those people.”

SIDEBAR:

Don’t write off malls yet

Is there still a place for malls with the increase in store closures?

Stephanie Cegielski, a spokesperson for The International Council of Shopping Centers, a global trade association of the shopping center industry based in New York City, shared some details about what she’s seeing on the national level.

“Closures are not indicative of the overall health of the industry, which is strong,” Cegielski said.

More than 90 percent of sales still happen in physical locations and mall occupancy rates remain high. In addition, malls remain an important part of the communities they serve.

As they adapt to changing demographics and community composition, they are increasingly becoming venues for entertainment such as concerts and fashion shows and have co-working, health care and fitness facilities, she added.

“Retailers are increasingly experimenting with different store formats including smaller footprints, placing less inventory on the floor and temporary leases like pop-ups,” she said.

Large vacant retail spaces have many options, she added.

“What will go into big box locations varies based on the needs of the community,” she said. “We’re seeing grocery, fitness and other non-retail tenants moving into shopping centers. A large space can also be subdivided to accommodate several retailers.”