PRINT THIS STORY:

CHANGE TEXT SIZE:

OWNERS SHOW HOW TO BRING DEAD ANCHOR SPACES TO LIFE

By Dave Bodamer

Kravco did it with The Pavilion.

While big stores have been the cornerstone anchors for shopping centers, these days there is no guarantee that if one leaves, another will take its place. That has forced developers to seek creative ways to fill vacated big-box spaces.

The bankruptcy and breakup of Montgomery Ward and its more than 200 department stores last year provided owners a big wake-up call. Other giant chains have followed, including Service Merchandise, and even retailers that are not going bust are more frequently shuffling their portfolios and closing underperforming stores.

“This is on the radar screen of any owner that has lost one or more anchors and has not received a commitment from a replacement tenant within a six-to nine-month time frame,” said Todd Caruso, managing director of CB Richard Ellis’s retailer services division, Chicago.

For a strong, high-profile mall, industry officials say that finding a new tenant is no huge obstacle. But second- and third-tier malls have to explore some imaginative options, especially in a weak economy.

“You look at malls like Oak Brook (Ill.) Center or Tysons Corner, and those guys will never have a problem with empty anchors,” Caruso said. “They’ll always be fine. But the tier below that, you’ve got a situation where you’re going to be challenged.”

This is likely to be a pattern that outlasts the recession, observed Stephen Lebowitz, president of CBL & Associates Properties, Chattanooga, Tenn.

“I think for the weaker malls, it’s going to continue to be an issue,” he said.

Industry officials describe a stepped process that owners use when they lose a national player. The first choice, naturally, is always to bring in another one. But if that proves impossible, they look at regional and local department store chains, and after that, discount department stores such as Younkers or Value City.

But getting one tenant to fill the entire space can be a problem.

“Most big-box tenants don’t like to take over somebody else’s box because they have their own footprint,” said Don Pobst, director of tenant coordination at Kravco Co., King of Prussia, Pa.

Kravco faced that very problem when it lost an anchor at its King of Prussia mall. The May Department Stores Co.’s purchase of the Strawbridge & Clothier chain gave it two competing anchors in the center, prompting the retailer to close one of them. But a clause in the contracts Kravco held with the remaining seven anchors forbade it from filling the empty space with another department store.

So instead, the company turned the box into a leisure zone of sorts that it has named The Pavilion. Portions of the three-level space have so far been converted and leased to Borders Books & Music, Cheesecake Factory, Cosi, Morton’s Steakhouse, Organized Living and Urban Outfitters.

The biggest challenge for Kravco has been trying to find tenants for the third floor, which, unlike the first two levels, has no access to the parking lot and the mall’s common area. Kravco isn’t giving up, though, and is exploring unusual uses for that space, such as a fitness center or a laser tag area.

“It’s been a long and arduous process,” Pobst said, but he added that it is paying off. “I think we feel real good with the tenant mix that we’ve been able to achieve.”

CBL also turned an empty anchor space into a restaurant and entertainment appendage when a cinema went dark at its Post Oak Mall, College Station, Texas. But when food and entertainment tenants don’t come forward, there are still other nonretail options. Some have rented space to municipalities, telecom call centers and “technology hotels,” in which telecommunications companies install large mainframe computers and other equipment. Another option is breaking the big-box space up into two or more spaces.

CBL brought the city in to fill another anchor space at College Station. So far officials have filled 14,000 square feet of space with a police station and now are considering other municipal uses for a former Loew’s theater space.

“We’re still in the process of figuring out what to put in there,” said Lebowitz.

It’s never easy reconfiguring a space.

“It’s definitely a challenge taking an existing box and trying to do something else with it,” Lebowitz said. “It’s expensive taking the building systems and adjusting them. It could be just as expensive as building new.”

But the alternative — leaving it dark — can be even more costly.

In exploring Kravco’s possibilities, Pobst said the company looked at all sorts of alternate uses for the Strawbridge’s space. It considered bringing in a library, a children’s museum, or reconfiguring the entire space to turn the upper floor into a technology hotel or a call center.

Many of these ideas have been tried at various centers. About 18 months ago, Caruso said, call centers were the hot idea for “dead” space, but there’s a limit on how much demand there really is for that kind of use, he noted. Technology hotels make lucrative tenants, but the weight requirements are so stringent that often a developer will need to totally refurbish a mall’s structure, cutting into the cost-effectiveness of the idea. Community colleges, museums and libraries have also been brought in as tenants.

Shopping center owners outside the United States have faced similar problems with anchors going dark and have come up with their own creative solutions. Anchor spaces in Australian centers have been turned into food halls, said Ronald Altoon, a partner at Altoon+Porter Architects, Los Angeles, said.

“They have all kinds of fresh foods, cheeses and wines,” Altoon said. “Nearly every Australian center has those markets. They’ve converted old department stores and use the space to find a real good opportunity.”

So however bleak the outlook may appear for a center grappling with an empty anchor space, there is generally a solution out there, Caruso said.

“In general, where malls are located is still darn good real estate. That’s why they were built in the first place,” he said. “We’ve seen owners look into partnering with the cities to provide available funds to attract tenants. We’ve also seen properties go into a tailspin. We haven’t seen a lot of instances where there’s been demolition of structures.”

© 2008 ICSC. All rights reserved. | Terms and Conditions | Privacy Policy | Contact ICSC | ICSC Home |