Big retail spaces can create big headaches when their doors close.
It’s often tough to find replacement retailers for so-called big-box stores of more than 50,000 square feet and junior boxes of 20,000 to 40,000 square feet, some commercial real estate experts say. And as brick-and-mortar sales sag and some chains downsize or go out of business in the face of online competition from Amazon and others, finding retailers to take over empty spaces can be especially difficult.
At the same time, finding users to take on large storefronts in older parts of town — where household incomes are lower and therefore less attractive to retailers — poses additional challenges.
Toys R Us and sister retailer Babies R Us closed their Colorado Springs stores last week as part of the final days of the New Jersey-based chain, which has gone out of business after declaring bankruptcy last year. Those two free-standing buildings, along Citadel Drive ringing The Citadel mall northwest of Academy Boulevard and Platte Avenue, will add a combined 109,000 square feet of space to the retail market, El Paso County land records show.
Their closings follow the April shutdown of the Pikes Peak region’s last Kmart, a 104,000-square-foot building that anchored the Fillmore Marketplace center northwest of Nevada Avenue and Fillmore Street in Colorado Springs. Gordmans, meanwhile, closed a 45,000-square-foot clothing store at the Chapel Hills Mall in 2017 only a year after opening.
Those are just some of the latest large retail spaces to become vacant. Among others that remain empty:
• A 45,000-square-foot Sports Authority and 34,000-square-foot Golfsmith, which closed in 2016 at the Market at Chapel Hills West, southwest of Academy and Briargate boulevards.
• A 135,000-square-foot Sam’s Club that closed in 2015 northeast of Academy and Fountain boulevards.
• A 68,000-square-foot Kmart that closed in 2014 southeast of Powers Boulevard and Galley Road.
• And the 193,000-square-foot Macy’s department store that closed in 2009 — nearly a decade ago — at The Citadel mall, northwest of Academy and Platte.
“You’re not seeing the expansion of some of these bigger boxes and junior boxes as much as you did years ago,” said Mark Useman, a retail specialist and executive managing director of Colorado Springs Commercial. “It’s pretty obvious the internet has really been part of that reason.”
Aside from healthy retailers that might have slowed expansion plans and therefore aren’t moving into existing spaces, the list of chains that have closed stores is lengthy. According to online business publication Business Insider, familiar big-box and junior-box retailers that shuttered locations last year included Sears, J.C. Penney, Staples, Kmart, Macy’s and Gordmans.
Those closings, and the dormant buildings and shopping center storefronts left behind, are a nationwide problem; empty spaces aren’t unique to Colorado Springs.
The challenge of filling them is universal, too, and requires building owners and landlords to be more creative in finding new users, commercial experts say.
“The traditional soft-goods retailers are really hard to find,” said Jim Spittler, a retail specialist and founding principal with commercial brokerage NAI Highland of Colorado Springs.
Fitness centers, for example, have become a popular alternative to fill large shopping center spaces or free-standing buildings if more traditional retailers can’t be had, Spittler said.
Market newcomer Vasa Fitness of Utah recently opened in a 45,000-square-foot former Albertsons grocery, southeast of Colorado 115 and Cheyenne Mountain Boulevard on the Springs’ southwest side. The store had been vacant since 2015.
“They filled a void down there,” Spittler said. “They’re a shiny new fitness concept.”
Entertainment concepts are another relatively new option for large retail spaces, he said. Whirlyball, a family-run, Chicago-based entertainment center, opened last year in a 30,000-square-foot space in the Rustic Hills Shopping Center southeast of Academy and Palmer Park boulevards. Whirlyball features its signature game — where players ride electric bumper cars in a competition that mixes elements of basketball, hockey and lacrosse — along with bowling, food and beverages.
Smaller movie theaters are another potential entertainment use for large vacant spaces, Spittler said. And as Colorado Springs’ economy improves and its population grows, some newer entertainment concepts are looking at the city for possible new locations.
“There are some kind of small theater groups that are looking around that are more intimate … with the food service and stuff,” Spittler said. “They’re starting to look in the market. And there are some concepts that have been described as Dave & Buster’s (food, games and a sports bar) on steroids that are starting to look in the Colorado market and starting to look in Colorado Springs.”
Building owners and landlords also need to be open to new ideas for their properties. In the past, some large retail spaces have been converted to churches, employment call centers or even warehouse and industrial uses — assuming zoning and other regulatory hurdles can be cleared.
A California-based real estate company that owns the Fillmore Marketplace at Fillmore and Nevada and the former Kmart on site already plans to divide the store into three spaces — for 60,000-square-foot, 34,000-square-foot and 10,000-square-foot tenants.
Spittler, who’s marketing the Kmart with two colleagues, declined to say what new users are looking at the building. A new hotel that NAI Highland already said might be part of the shopping center’s redevelopment would be built elsewhere at the site.
“It’s kind of like a puzzle,” Spittler said. “We’re trying to put the right pieces together that will work.”
Useman said some buildings might need to be reconfigured.
“You might have a 40,000-square-foot box, and they might have to lop off the back of it and put something smaller in the front to accommodate it, to get them leased, which I think landlords are open to,” Useman said. “It’s better to get somebody in there and maybe convert the back into some kind of storage facility or some other kind of use. They’re getting creative to reconfigure a lot of these spaces to accommodate a use.”
Regardless of the flexibility that landlords and property owners show, or their efforts to recruit nontraditional retail concepts, some buildings will be tougher to lease because of their locations, Useman and Spittler agreed.
Neighborhoods that surround The Citadel — home to the vacant Macy’s, Toys R Us and Babies R Us — are older with lower household incomes and don’t necessarily appeal to retailers seeking deeper-pocketed consumers in faster-growing areas.
In its series in November about conditions on Colorado Springs’ southeast side, The Gazette reported that household incomes in several southeast census tracts immediately south of The Citadel were thousands less than the citywide median of $54,527 in 2015.
Likewise, thousands of homes have been built on Colorado Springs’ north and northeast sides over the past several years, where land is available and residents with higher household incomes are flocking. And retailers are keenly aware of those trends.
“Retailers go where the rooftops are and where the incomes are,” Spittler said.
Some commercial experts, however, say the challenges of filling the biggest spaces aren’t necessarily any greater now than in years past.
Take the former Sam’s Club on South Academy Boulevard. The cost to lease the 135,000-square-foot building is just under $1 million a year, said Frank Griffin, managing director with the Denver office of Newmark Knight Frank, who’s marketing the property with two colleagues.
A pricey lease rate makes finding the right tenant difficult at any time, despite today’s changing retail landscape, Griffin said. Also, the building was designed for a specific user, and remodeling it for a second-generation tenant isn’t easy, he said.
“It’s always a challenge, and it doesn’t happen fast,” Griffin said. “It’s rare that we ever turn a box real quick, ever.”
Over the past year, he said, several potential users have shown interest in chopping up the Sam’s Club building into multiple spaces. But the goal remains to find a single user, and Griffin said it’s still realistic.
At one time, Costco Wholesale Club, which has two locations in the Springs, expressed interest. But Costco said it needs the city’s population to swell by another 400,000 before it would add a third store, Griffin said.
“We’ve had some opportunities to carve it in half, and we’ve passed on those,” he said. “We’re still optimistic we can find a user for the whole thing, and we’ve got a couple circling it right now, and I think we’re going to stick with that for right now. Down the road, that might change. But you’ve got to protect that investment as much as you can.”
“You’re not seeing the expansion of some of these bigger boxes and junior boxes as much as you did years ago. It’s pretty obvious the internet has really been part of that reason.” Mark Useman, retail specialist and executive managing director of Colorado Springs Commercial