Anchors Away: Filling the Big Box Retail Spaces
Vacancies in retail centers have hit the highest percentage in the past 20 years. There are now more empty units than at any time during the past two recessions, according to figures published by Reis Moody’s Analytics.
Much of this empty space is “anchor space”, also known as big box stores and department stores. How can you turn this into a great growth opportunity?
In the U.S., 46 percent of leasable area in shopping centers has historically been filled by department stores, yet shoppers are moving towards specialty stores, fast fashion, and internet shopping.
At first glance, this may be daunting for property managers, who will be tasked with repurposing these large spaces. Although leasing these to other tenants of similar size seems like the obvious solution, reconfiguring a space to lease it to multiple tenants could be more financially lucrative. Big box stores have typically paid low rents, and so this is an excellent opportunity to lease to new tenants who may pay far more than the previous rental rate. For example, one property management company has re-leased space previously occupied by Sears Holdings at 4.4 times the previous rental rate.
What kinds of tenants have great potential to fill these spaces?
- Restaurants are now destinations and anchors in their own right, not merely pit stops for shoppers.
- Grocery stores in malls may seem like an odd idea, but according to a GGP 2017 survey, almost 50 percent of shoppers noted that they would like to see a grocery store in their local mall.
- The large size of big box stores and department stores make them prime for movie theatres and other entertainment spaces.
Although fast fashion apparel tenants, restaurants, and entertainment venues are the most common replacements for these spaces, there are even more options. Non-retail uses can even bring traffic to a center in the middle of weekdays, which are typically slower times.
Here are some ideas for repurposing anchor space:
Community Colleges & Technical Schools
Senior Care & Housing
Distribution Centers for Online Retailers
Fast Fashion Apparel
Other Game / Entertainment Experiences