The death of big-box retailers such as Ultimate Electronics, Circuit City and Linens & Things, along with Albertsons closing most stores in the Denver market, has left 78 large vacancies dotting metro Denver’s landscape.
That’s 4 percent of the gross leasable area for the retail market, and almost half of all vacant retail square footage, said Matthew DeBartolomeis, senior managing director for CB Richard Ellis Inc. (CBRE).
And there’s more to come, with Borders stores closing, adding about 175,000 square feet of retail space.
But the good news — according to retail brokers, building owners and an analyst — is that the Denver retail market seems to be improving. Owners and city officials are working with prospective tenants who want to occupy those big-box spaces, defined as 20,000 square feet or larger.
“I’ve been quite surprised how many have been absorbed in some form or fashion,” said David Larson, a partner with Denver’s Legend Retail Group LLC.
Some recent examples:
• Murdoch’s Ranch & Home Supply is taking most of a 96,000-square-foot vacancy left by Target and Circuit City on the northwest corner of Parker Road and Lincoln Avenue in Parker. In April, Parker’s Town Council approved a zoning change to allow a 23,604-square-foot accessory outdoor commercial display in the parking lot, where customers can load the fencing supplies they bought in the store.
That space had been vacant since December 2008.
• Big Time Trampoline Fun Center will fill a 26,744-square-foot big box with an indoor family entertainment center at 7330 W. 52nd Ave., in Arvada, near Wadsworth Boulevard and I-70. The former Appliance World had been vacant for more than a year.
• A new gourmet grocer, Two Mile Ranch Market, will be open in less than a month at a big box left vacant by a Wild Oats Market at Orchard Road and University Boulevard, in Greenwood Village.
• Restaurant/bar Toby Keith’s I Love This Bar and Grill filled a big vacancy left by a closed Borders at 8260 Northfield Blvd., at the Shops at Northfield Stapleton in Denver.
Big Time’s lease was an example of landlords being flexible.
Allen Ginsborg, managing director and principal for Newmark Merrill Mountain States of Fort Collins, said it worked with Big Time to get it into the vacancy at the Arvada Marketplace East, which Newmark owns.
“To get the credit on this building was very challenging for them,” Ginsborg said. “But we supported what they were doing and took a flier on them. It was a structured transaction that was really a partnership.”
Newmark even is doing the marketing for Big Time’s grand opening, he said.
While the Border’s spaces, and those of similar size from 25,000 to 35,000 square feet, will be easier to fill, the larger vacancies reaching 100,000 square feet will remain a challenge, one analyst said.
“The ones 20,000 to 30,000 square feet are the perfect size for other tenants to use the entire space,” said Mary Beth Jenkins, president of the Laramie Co. of Denver. But there are few single-purpose users that can take a 100,000-square-foot space, she said.
Since many of the Borders stores are in or near malls, they have a better chance of being filled more quickly, she said.
“Within the next six months to a year, every Borders space will be taken,” Jenkins said. “They chose great locations.”
Many times, it’s too expensive to divide the boxes. That can cost $1 million or more, DeBartolomeis said.
“When you add $1 million to the bottom line, most of the time you can’t get the returns on the rents to justify a deal,” he said.
But the vacancies have created an opportunity for “regional retailers seeking an opportunity to expand and get a better position in the market,” said Jon Weisiger, senior vice president for CBRE and DeBartolomeis’ partner.
Ginsborg said that opportunity also exists for “open market-entry retailers that may not have been able to penetrate these areas.”
The CBRE brokers said more than half of the big-box vacancies are class C properties, which aren’t being looked at or rented as much as class A and B properties.
“The City of Louisville had a former Safeway that’s gone through a rezoning process that’s going to create some residential and retail,” DeBartolomeis said. “You’re going to get some situational uses like that, and more developers will buy it for the land value and take out the building ...
“When you look at ‘C’ boxes selling for less than $2 million, some sit on four to five acres of prime real estate with improvements to the street, plumbing and sewer already there. We’ll see more creative uses on those ‘C’ properties.”
That creativity also extends to landlords leasing to “pop up” stores, often seasonal retailers who sell Halloween or Christmas goods.
“The pop-up guys are loving it — they get grade A sites to choose from,” Larson said.
Jenkins predicts many of the spaces will be snapped up by grocers, frugal fashion stores such as Forever 21 or H&M, or even health clubs.
Churches or schools also could use the vacant spaces, she said.
“We’re still coming out of a big recession,” Jenkins said. “But the key is that Denver is still a dynamic market.”
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