The convenience of e-commerce has become the greatest disruptor of the retail industry, impacting store closures nationwide. A bit ironic considering that Woolco, the first big-box retailer (BBR), was the catalyst to the convenience shopping movement. In 1962, their store opening offered an abundance of brands in their 50,000-square-foot lot, inspiring families to shop together.
As BBRs rose in popularity, their presence not only impacted the rhythm of how we shop but where we shopped, too. BBRs, and to a degree, the steadfast department store, left little room for local and independent businesses to compete for consumer dollars. BBRs fueled a culture that diminished the flow of foot traffic and consumer frequency to downtown shopping districts. Now, as they exit prime real estate locations thanks to the ease of online shopping and doorstep delivery, it seems we’ve come full circle.
The Best Use Scenario
There is much speculation over what will replace BBRs. And although there is no definitive category as of yet, the vacancies have drummed up interest from governing municipalities and local special groups looking to ‘reclaim’ the land for the betterment of the community. According to Todd Scheffler, vice president of National Retail Repositioning at Colliers, “Much of what is redeveloped has to do with how the governing municipality views new uses and how those fit within local zoning laws and the general plan. Often, a governing authority might consider increasing land use density and alternatives via tax incentives, provided it has a voice in the decision-making process guiding the development.”
New uses refer to its highest and best use now and in the near future, ideally, one that benefits both the developer and the community, physically, legally, financially, and time-wise. “No municipality wants to politically underwrite a vacant box (or land) at the core of its community but giving them ‘free reign’ on deciding the new use isn’t feasible either. Ultimately, the developer and the community must come to terms on what the highest and best use would be,” shares Scheffler.
When One Store Closes, Another Opens?
BBR properties are most often designed specific to the retailer’s requirement — storefront width, column spacing and ceiling heights —which poses a challenge for a property’s resale or ‘retenanting’. With the surplus of space entering the market, there is also a higher chance for these properties to remain vacant, unless developers and landlords strategically rethink the use scenario.
“Repositioning now involves forecasting and identifying new and emerging business trends and market forces unforeseen 40 years ago,” asserts Scheffler. “Except in some very limited and unusual circumstances, reoccupying BBR with another retail use entirely within the existing footprint is highly unlikely. The reality is that BBR land redeveloped is more valuable than in its as-is condition, virtually eliminating ‘anchor tenancy’ as we know it.”
Less is More in Every Market
We’ve seen the conversion of larger retail spaces into community-friendly retail experiences (areas that thrive from consumer interaction) in growth cities like Philadelphia, Nashville and Detroit. “Owners of and investors in portfolios dominated by BBR are anticipating the ‘atomization’ of big-box formats into smaller retail venues combined with other mixed uses at higher density yielding higher rent,” said Scheffler.
The retail footprint is changing — actually it’s shrinking — as retailers lean toward smaller, curated shopping experiences. And some BBRs are expanding their presence to the “urban core,” strategically repositioning themselves across multiple shops and boutiques in well-trafficked areas. Target recently inked deals to establish its small-format locations in premium shopping areas like Union Square and Grand Central Terminal in New York City.
Urban environments’ compact properties and varied lease terms are ideal control areas for retailers and brands to think outside the box. The lack of sprawl acts as an innovative launchpad to test new concepts and product lines. IKEA piloted an urban storefront in Vienna to determine the feasibility of a store catered to the pedestrian consumer.
BBRs and retail developers are slowly embracing the ‘new world order’ that is retail. Despite continued competition from Amazon, they are taking steps toward a disruption of their own.
About the Author:
Anjee continues to be an insatiable enthusiast of all things retail. She’s a student of culture with a pulse on future shoppers and the fleeting trends constantly changing the retail landscape … driving retailers, landlords and developers crazy!