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Shopping Centers Today -> April 2001
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COPING WITH THE LOSS OF AN ANCHOR
ICSC begins building a database on how small-center owners deal with the problem
By Michael Baker
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It’s
getting harder and harder for small centers to get and keep
grocery stores as anchors.
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At the suggestion of some small-center owners, ICSC is developing a database to help owners reposition properties distressed by the departure of anchor tenants. Such a database would make it possible for owners to share the experiences of others who had at one time or another found themselves with dark anchor spaces at neighborhood or community centers — and, it is hoped, found innovative ways of filling them.
The problem is a common one — traditional small-center anchor retailers such as supermarkets and drugstores have undergone significant consolidation in recent years, making them less abundant, harder to get and harder to keep.
According to the Food Marketing Institute, the Washington, D.C.-based trade association, the number of grocery stores declined from about 147,000 in 1990 to 127,000 in 1999, a decrease of 14%. The decline in the number of drugstores over the same period was even steeper — the National Association of Chain Drug Stores reports that there were 40,715 drugstores (both chain stores and independents) in 1999, a 19% decline from the 50,517 drug stores in operation in 1990.
ICSC research staff decided on a pilot survey to see how much information about dark anchor experiences could be collected from small-center owners among the membership. Staff collaborated with several owners on the design of a survey instrument and dispatched the completed three-page questionnaire to ICSC member companies identified as possible small-center owners.
Responses were obtained from 79 companies with information about 114 centers, including 71 neighborhood and 32 community centers.
Grocery stores accounted for 44% of the anchor tenants that vacated centers in the sample, and 56% of the anchor tenants that vacated neighborhood centers. The next most frequent vacating anchor type was discount stores, followed by department stores and then drugstores.
Approximately one half (49%) of the anchors vacated due either to bankruptcy (e.g., Caldor, Jamesway, Hechingers) or corporate downsizing (e.g., Winn-Dixie grocery, Eckerd drugstore).
Another 34% vacated due to store relocation. Of these, one-third involved centers that the respondent deemed dominant in the market area — having a dominant center is clearly no guarantee that anchors will stay put. Meanwhile, 17% vacated for other reasons (e.g. competition moved in across the street or the landlord didn’t renew the lease because he wanted to redevelop the property).
For dominant centers, the median duration of the anchor vacancy was 18 months; for nondominant centers, 16 months. At least in this limited sample, dominance did not mean speedier replacement of the departed anchor.
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In 38 cases (33%), nonanchor co-tenants left the center during the period of anchor vacancy. For these centers, the median anchor vacancy period was slightly longer — 24 months. Either the more protracted period of the anchor vacancy drove cotenants to leave, or the departure of the cotenants made it more difficult to replace the anchor.
Not surprisingly, most respondents reported that co-tenants experienced reduced traffic and sales during the period of anchor vacancy. Several respondents also mentioned the stigma of a “problem” or “distressed” property.
Rent relief and heightened communication with tenants were the most common actions by landlords to maintain occupancy during the period of anchor vacancy. (See Table 1.)
The top replacement anchor tenant types were discount and grocery stores. In some cases the replacement anchor tenant was unconventional; e.g. government agency, church or telemarketer.
Twenty-four of the respondents reported subdividing the old anchor space in order to accommodate new tenants, while 37 respondents undertook other kinds of renovations either to the box itself or to the whole center. Of the 61 cases where subdivision or other renovation occurred, the landlord bore the entire cost in 42 cases. In the remaining instances, the landlord and incoming tenant either shared the cost or the latter bore all of it.
Fifty
of the respondents reported that their retenanting efforts had been
successful. The most common reasons given were increased occupancy/traffic/sales.
Michael Baker is assistant director of research for ICSC.
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