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Jul 18, 2016
Vacant Big Box Spaces Seeing Redevelopment
The bad news for long-time Kmart shoppers in Ottumwa, Iowa was announced last January: the national chain was closing its local outlet, a store that had been in operation since 1981.
By late April, the doors were shut to the 87,500 square foot store, leaving a big hole in the larger Quincy Plaza which has more than twenty other stores, varying in size from 500 square feet to 5,900 square feet.
“But we decided to step up as soon as we could to see what we could do to get someone else into that space,” says Sarah Stroh, the executive director of the Ottumwa Economic Development Corporation.
By so doing, city officials in the city of just over 25,000 in southeast Iowa studied the benefits of approving a $350,000 loan for Phillips Edison and Company, the Cincinnati-based real estate firm that owns the site, to help pay for the renovation of the old Kmart store.
“They have a lease agreement in progress right now with what I would refer to as a ‘destination retailer,’” continues Stroh, “but we are not at liberty to say yet who it is.”
That a quick response to the sudden exit of Kmart from the Quincy Plaza may result in a large empty retail space suddenly becoming busy again is not just good news for the residents of Ottumwa.
It’s also an example of what a community can do when suddenly confronted with the exit of a big box retailer.
“Communities are not entirely without power in these situations,” notes Sarah Schlinder, a University of Maine School of Law professor and expert in urban policy and land use law.
“In fact, more and more we are seeing that communities, realizing how harmful it can be when a big store leaves, are saying to new big stores, ‘Yes, we want you, it would be economically beneficial to have your store here, but we also know how bad it will be if you leave, so we want to put into place some mechanisms,” Schlinder says.
Those mechanisms typically require such things as establishing what Schlinder calls a “bonding measure” when a new store is coming in, stating that “if they leave within 10 or 15 years, they are responsible for the upkeep of the facility so that it doesn’t look abandoned, and they are also responsible for helping to assign new tenants.”
The challenge of what to do with an abandoned big box store has become particularly acute this year in the wake of Wal-Mart’s announcement that it is closing 154 stores of varying sizes across the country.
In making that announcement, Wal-Mart CEO Doug McMillon said the closings were necessary to “Keep the company strong and positioned for the future.”
In April, the Sears Holding Company, noting a 7.2 percent drop in sales last year, said it was closing 68 Kmart stores in 2016, along with another 10 Sears stores.
Worried about the negative impact such large abandoned stores can have on surrounding commercial property, especially when it is in a strip mall setting, community leaders and others have been trying to put together deals they hope will result in a quick redevelopment of those spaces.
In Fort Collins, Colorado, just weeks after a Kmart store closed its doors this spring, city leaders announced that a King Soopers store was on the verge of redeveloping the site.
In North Lauderdale, Florida, Arena Shoppes announced that it was purchasing an abandoned 126,000 square foot Wal-Mart store and redeveloping the space into a series of smaller retail spaces varying in size from 5,000 to 30,000 square feet.
In Charlotte, North Carolina, the non-profit Movement Resources, an entity connected to the Indian Land-based Movement Mortgage, has taken steps to redevelop an aging shopping center anchored by an abandoned Kmart, with plans to turn part of the space into a nonprofit magnet school.
And in McAllen, Texas, city leaders helped to push through the transformation of a 124,000 square-foot Wal-Mart into what is now billed as the largest single-floor public library in the country.
“A lot of the re-use ends up being alternative type uses such as churches, bowling alleys, libraries and different civic functions,” notes Schlinder, who is also the author of the article “The Future of Abandoned Big Stores,” which appeared in the University of Colorado Law Review in 2012.
In Ottumwa, Stroh says communities confronted with a suddenly empty Kmart or Walmart space shouldn’t despair. “You just have to think creatively, and try to imagine all the ways that space can be used,” she says, adding “Because the last thing you want to have happen is to have something that big just stay empty.”