National vacancy stats for big-box centers have come down a bit to 6.6 percent from a recent high of 7.9 percent in 2009, according to CoStar. But CoStar expects that figure to inch back up by the end of this year, likely hitting 6.8 percent, because of more retailers closing their doors in the weeks and months ahead.
Memphis has seen plenty of examples, especially when looking at empty retail spaces from a broader perspective than the typical metric of a big box that has a minimum of at least 50,000 square feet or so.
The 20,000-square-foot Tower Records space in Downtown’s Peabody Place center, for example, was vacated when the music retail giant was liquidated six years ago and still has not been filled.
A 16,000-square-foot space formerly occupied by World Market, directly across Germantown Parkway from Wolfchase Galleria, still has not been filled since the store’s closing three years ago.
Tower Records, which had been one of the anchors of Peabody Place, filed for Chapter 11 bankruptcy protection in 2004, then again in 2006. World Market entered the Memphis area six years ago with three stores, but in 2009 the owner of the chain announced it was closing 26 stores and exiting eight markets, including Memphis.
In a statement about the closings, World Market’s president and CEO Barry Field said the company was moving to “rationalize its operations and media markets in this challenging economic environment.”
“The challenge in filling big-box spaces would be the lack of 40,000- to 60,000-square-foot users, and this is not just a Memphis problem,” said Andrew Phillips, vice president of investment and retail services in Memphis for Colliers International. “We are seeing some discounter retailers who will take down larger spaces, but they are not willing to pay the kind of rents that many landlords want to see.
“If a landlord decides to subdivide the space, it can be expensive, but we have seen some activity when a landlord is willing, or financially able, to do so. A good example of this is at the Market at Riverdale Bend, where we had a 45,000-square-foot former Best Buy space, which the landlord divided for Planet Fitness and Goodwill.”
Phillips said the spaces formerly occupied by Blockbuster, the movie chain that exited the Memphis market a few years ago, have been actively scouted. For the old Blockbuster space in the Germantown Collection, he said there’s been a great deal of interest and that Colliers has just signed a lease for a majority of the space with Gould’s Salon.
Most of those locations have high visibility and demanded higher rents. That requires particular care to choose the right tenant to backfill those spaces.
“Memphis (also) was flooded with big boxes with Kroger’s purchase of Schnucks and subsequent closure of certain locations,” Phillips said. “We have already seen a few of the best located former grocery stores backfilled, and many of these grocers are doing quite well. Many of us were hoping to see another grocery chain immediately jump into the Memphis market after the Schnucks departure, but it will take some time.”
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