By Michael Havdala
Senior Vice President of HSA Commercial Real Estate
As the economy continues to stabilize, many retailers are letting out a sigh of relief. However, despite the improvements in consumer confidence and the business environment, few traditional retailers are actually expanding in the current marketplace. For the most part, national retailers are still holding back and contemplating their business and real estate strategies before committing to new locations.
To accomplish the goal of leasing or selling surplus real estate today, brokers have to be a little bit more creative and think outside the big box. In many cases, that means exploring the possibility of non-retail uses. Non-retail entities are finding it feasible to lease or purchase quality property at prime locations given the lack of competition among potential users, especially traditional retailers.
Based on HSA Commercial’s experience and what our team is seeing in the marketplace, here are some of the more common, non-traditional uses that we’ve seen absorb these retail vacancies recently:
Medical uses Area hospital and doctors’ groups have been able to smartly re-use former banks, restaurants and retail buildings to open outpatient facilities and clinics in prominent locations closer to the residential population. NorthShore University Health System recently signed a long-term lease for a former Borders at a highly-visible corner in Deerfield.
Walgreens has also publicly expressed interest in shuttered Borders locations and recently leased a two-level, former Loehmann’s in downtown Chicago across from Macy’s. HSA PrimeCare, the medical office division of HSA Commercial, purchased the Plunkett Furniture building in River Forest to construct Loyola Medicine’s Gottlieb Center for Immediate Care. The 9,800-square-foot state-of-the-art outpatient clinic just opened for patients in February. As we market surplus property on behalf of corporate clients, a disproportionate level of interest right now is coming from medical uses.
Fitness clubs In more convenience-oriented trade areas, fitness users (e.g. Zip Fitness, Anytime Fitness, Charter Fitness, XSport and Fitness 19) have filled some of the junior box space that has been shuttered by retailers over the past few years. Though some shopping center owners are naturally concerned because of the parking intensive nature of the use, fitness tenants can contribute to the revitalization of a shopping center. These “all hours” tenants help drive daily traffic to the retail centers that can produce increased sales for neighboring retailers.
Churches/religious groups Churches have been particularly active in the slow economy in an effort to target well-located properties and maximize their exposure to the community. Recently, a church group in Matteson purchased and redeveloped a former Circuit City. Vacant cinemas with stadium seating for large audiences are also smart and viable space for religious groups, and many outdated theaters in the inner city of Chicago have generated interest as worship facilities.
Schools School districts and professional education programs have inhabited some of the Chicago area’s vacant boxes, particularly in the suburbs. A few years ago, I sold a former grocery store building to a school district in Dolton. Everest College converted a vacant Circuit City store in Bedford Park and a former Value City in Melrose Park into for-profit education facilities. Also, preschools and tutoring programs catering toward childhood education are continuing to expand, including Kumon and The Learning Experience.
Children’s entertainment Numerous flex and secondary retail spaces have been repurposed by entertainment companies like Pump It Up, Monkey Joe’s and The Little Gym, which operate indoor jungle gym facilities. These tenants typically seek high, clear ceiling heights and spaces with visibility to neighborhood or regional retail traffic.
Thinking critically and creatively while exploring all possible uses will be the key to reducing the market’s retail vacancy. Keep in mind that only a local broker can truly be aware of the needs and motivations of a community and know the best and most active non-retail users to target for that particular area’s residents. With the absence of major expansions from national retailers, there are more reasons than ever to tap a local, experienced broker who knows the immediate market, inside and out.
Michael Havdala, senior vice president at HSA Commercial Real Estate, has represented several national retailers including SuperValu (Jewel-Osco), PNC Bank, T.G.I. Friday’s, and Burger King in the disposition of surplus real estate assets. Havdala also has represented Darden Restaurants, Yum! Brands, UPS Store, Accelerated Rehabilitation Centers, Golden Corral, and others in numerous transactions throughout the Midwest. Havdala can be reached at email@example.com.