Updated: March 9, 2014 at 7:51 am
Filling large blocks of retail space is a never-ending challenge for Colorado Springs' commercial real estate industry. It seems the minute one retailer or business announces it's taking over one of the area's 40,000-square-foot-and-up spaces, another big-box occupant announces its departure.
Some big-box spaces have been filled in the last 11/2 years: Wal-Mart opened Neighborhood Market stores in spaces once occupied by King Soopers and Albertsons groceries; Garden Ridge, a Texas-based home decor superstore, moved into a vacant Target; and farming and ranching retailer Big R and a Planet Fitness health club took over a former Cub Foods/Grocery Warehouse store.
But Kmart and J.C. Penney recently announced they'll close stores in May,. And a handful of othercavernous spaceshave been vacant for several years, including the former Macy's department store at The Citadel mall, which has been empty since 2009; a Circuit City on Powers Boulevard, vacant since the electronics chain went under the same year; and an Albertsons on Central Academy Boulevard that's been shuttered since 2006.
More big-box closures loom if the Albertsons-Safeway merger announced last week results in a shakeup of the local grocery landscape. Meanwhile, Wal-Mart previously said it plans to close its Sam's Club on South Academy in favor of a new Sam's that will be part of a shopping center south of the Springs.
"That's the way this market has felt for five years or more now," said Jay Carlson, a broker with Front Range Commercial in Colorado Springs. "We make some kind of stride - one step forward. And then we take one or two steps back."
The problems of large vacant retail spaces go beyond creating a gaping hole in a shopping center or depriving a building owner of rent payments. Some of the spaces become targets for vandalism and theft, and it often hurts smaller retailers who had located near big-box anchors to feed off the traffic they draw.
Colorado Springs, like other cities, has had its share of large empty stores over the years.
One factor in play in the Springs during the last 10 to 15 years: A few retailers, such as Best Buy, closed stores on Academy in favor of moving to Powers, which has become the area's busiest retail corridor and is near neighborhoods with higher household incomes.
The local and national recessions added to the problem over the last five to six years. Circuit City and soft goods retailer Linens 'n Things, for example, went out of business, leaving behind well-located spaces along Powers and North Academy.
At the same time, some financially healthy retailers shelved expansion plans to wait for the economy to improve, which kept vacant spaces dark even longer, said Fred Veitch, a vice president with Springs-based Nor'wood Development Group.
"With the economy continuing to be soft, retailers have not aggressively gone out and sought to reposition their stores," Veitch said.
Some retailers, such as Macy's, protected their bottom lines by downsizing operations and closing underperforming stores, such as the one at The Citadel mall. That's the same reason given recently by J.C. Penney and Kmart for their plans to close locations in the Springs.
Today, the economy has improved enough that a few retailers are dusting off expansion plans, which means some empty spaces could get a second look, Veitch said. Some vacant properties could prove attractive because they'll be cheaper to lease versus the cost of building, he said.
"To the retailers who are now moving forward, the positive thing is, they can make a much better economic transaction than it will cost to build new construction," Veitch said. "The existing boxes were built at a time, in most cases, between 10 and 15 years ago, when costs were less. To replicate the same buildings will cost probably on the scale of 30 percent more."
That means spaces such as the Kmart on Powers, at Palmer Park Boulevard,or a former Safeway at Academy and North Carefree Circle, which closed nearly two years ago, could become candidates for new retailers; both buildings were constructed in 1982.
Yet, filling such spaces will remain tough.
Carlson questioned if there are enough retailers to fill all of the empty spaces. Even as the national economy has improved, Colorado Springs needs jobs that will make the area more attractive to new chains.
"We have too much retail space right now," Carlson said. "There's just not enough demand for the spaces."
Also, Carlson said, the Springs' demographics aren't as attractive as some cities'. Sure, the Springs has pockets of high household incomes on its southwest and north sides. But the Denver area has many more such neighborhoods, he said.
John Egan, a broker with NAI Highland Commercial Group, said filling empty spaces will depend, in part, on location. Consider the Safeway at Academy and Carefree, which is close to the busy intersection at Academy and Austin Bluffs Parkway, which features a rebuilt shopping center on its northwest corner. That Safeway space will be more attractive than the former Albertsons in the nearly empty Rustic Hills North Shopping Center at Academy and Palmer Park boulevards, he said.
"Retailers will flock to where the activity is, where the action is, where there's better foot traffic and more shoppers," Egan said.
Even if new retail chains come to the Springs and others expand, not every empty big box will have the location that retailers want.
That's why some large spaces likely will be remodeled for new uses - a practice that's taken place over the years in other big boxes.
Idaho-based Building Materials and Construction Services is adding a second Springs location by taking over 43,500 square feet in a former Pace Membership Warehouse building in the Bally Plaza Shopping Center, northeast of Academy and Chelton Road. Another 30,000 square feet remains available for lease in the front of the building, Carlson said.
Meanwhile, a New York real estate company that owns the Spring Creek Shopping Center on the Springs' south side has submitted plans to city officials that call for the former Rancho Liborio grocery to be converted into a warehouse and distribution center. The space would become home to Cameron's Products of Colorado Springs, which distributes kitchen and barbecue products.
Non-traditional retail uses aren't always the best solution, however. A warehouse and distribution center that takes the place of a grocery won't necessarily benefit a retail center's smaller stores and restaurants.
"When you put in a non-traditional retail use that doesn't bring in a lot of daily traffic, like a church or school, it doesn't help the other retailers survive," Carlson said.
In other cases, the age and location of some big-box retail spaces make them candidates to be razed, not remodeled. The Rustic Hills North Shopping Center, built about 40 years ago, might be better off as apartments or something else, Carlson said.
"There's some retail centers that just need to go away," he said, referring to Rustic Hills North. "It's been there a long time. People have tried to make things work there. Now I think it's down to a situation where the property just has to either be rebuilt or torn down."
Contact Rich Laden: 636-0228
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