July 19, 2004
Big boxes, small tenants | A spate of empty big-box stores gives Lewiston-Auburn investors opportunities for redevelopment
By Sean Donahue
In 2001, when Wal-Mart opened a new, 266,000-square-foot supercenter on Mount Auburn Avenue near the Auburn Mall, it left its previous, 116,000-square-foot location sitting vacant just across the street. For years, that empty shell has invited speculation from residents and real estate developers about whether a new big-box tenant eventually would fill the hole in a burgeoning retail nexus ˆ in recent years, the Mount Auburn corridor has attracted a new Lowe's in addition to the existing Wal-Mart, Home Depot and BJ's Wholesale Club.
Now, though, the redevelopment strategy proposed by George Schott, a local business owner and real estate investor who bought the building late last year, makes it likely the space won't be filled by another big-box retailer, but by several, smaller national chains. With ongoing efforts to find a single tenant for the space proving unsuccessful so far, Schott and his real estate broker have been focusing their efforts on subdividing the big shell into as many as three smaller, 30,000-square-foot stores.
The plan acknowledges the fact that even as the Lewiston-Auburn area has become a more attractive location for retailers, many of the national chains that tend to cluster around mall areas ˆ Linens 'n Things or Dick's Sporting Goods, for example ˆ still are missing from the L-A market. And those stores simply don't need as much space as Wal-Mart used to occupy. "There are not many retailers of that [big-box] size beyond the Wal-Marts, Kohl's, K-Marts, et cetera," says Craig Young, a broker with CB Richard Ellis/The Boulos Company who is marketing the former Wal-Mart for Schott. "But you have plenty of secondary guys who are very successful, but only need 30,000 to 40,000 square feet."
Across the river in Lewiston, at least two other big- and medium-box buildings also may be broken up for multiple tenants. Shaw's Supermarkets ˆ which built itself a new Lewiston store last year ˆ is marketing its 42,000-square-foot former location as a two-tenant building, and already has a tentative agreement with Dollar Tree, a discount variety store, to take over 19,300 sq. ft. there. Shaw's also owns the 73,000-square-foot former Ames department store at the Lewiston Mall, which it bought in 2002, and is actively marketing that space as a potential subdivision opportunity.
Breaking up disused big boxes has become common around the country, as Wal-Marts have molted and morphed into supercenters, and K-Mart and Ames locations have collapsed under pressure from the retail giant. But the potential reuse of the Wal-Mart, Ames and Shaw's locations in Auburn and Lewiston tells planning and development officials from both cities that their retail sector is emerging as an important regional hub. With roughly 500,000 people ˆ nearly half the state's population ˆ living within a 30-mile radius of the Twin Cities, existing retailers already draw shoppers from as far away as Farmington, says Lee Feldman, director of Auburn's planning department. The chance to cluster more national, but not necessarily big box, retailers around existing giants could capture even more retail dollars that area residents might otherwise spend in the Maine Mall area in South Portland. "If we can provide the same stores and services, it certainly makes it more convenient for people from Turner, Livermore and other locations to drive here rather than driving to the Portland market," Feldman says.
At the same time, though, Craig Young and other real estate experts say the urge to subdivide has more to do with broader retail trends than anything specific to the L-A area. Wal-Mart supercenters tend to attract copycat retail developers looking to capture some of those stores' traffic, says Young. Likewise, national chains have practically saturated larger markets in the Northeast, and increasingly are looking for expansion opportunities in places like Maine.
Those trends could work to local developers' advantage as they try to find lucrative second acts for these buildings ˆ which isn't always an easy task. "In circumstances where big-box stores can be carved up for smaller merchants, it's a very fortunate situation," says Blount Hunter, a retail development consultant in Norfolk, Va., "because in many cases those empty carcasses litter the landscape and are chronic problems for communities."
Reuse, recycle
Like much else in real estate, the potential marketability of empty big-box stores starts with location. Many buildings, such as empty K-Marts or Ames stores, tend to be in older, struggling shopping centers, says Hunter, and thus are not particularly attractive to new tenants. But others often are located in bustling retail strips that already attract a steady flow of shoppers. Young believes the empty Auburn Wal-Mart is one of the latter, and benefits from its close proximity to Wal-Mart's newer supercenter, as well as the new Lowe's and other stores.
Another advantage in reusing big boxes, both to developers and to city planners, is the ability to reuse previous planning, traffic management and construction work. All the necessary infrastructure, such as parking, utilities, sewer and stormwater management systems, is still in place. Public roads are unlikely to need much alteration to accommodate new traffic patterns, since they've previously served a large shopping destination. "[If] it's a Circuit City and a Staples taking over the same place that a Wal-Mart once stood, you've got the same traffic and trip generation, you've got the same impervious surfaces and other features," says Feldman. "The built environment is already there."
Breaking up those stores for more than one tenant, though, can be an expensive process. Young, who envisions dividing the old Wal-Mart into three new, smaller stores, estimates owner Schott will spend more than $1 million on the subdivision, including further renovations and new landscaping. But since those alterations are cheaper than new construction, Young says he expects to lease the new stores for about $8 per square foot, not including operating costs and utilities, versus the $12 to $15 per square foot a tenant likely would pay in a new building.
Though Young says he is talking with several potential tenants for the building, he hasn't yet struck a deal with any retailer. However, Young also is marketing another recent Schott purchase ˆ a 14-acre parcel across from the old Wal-Mart building that Young says could house a 50,000-65,000-square-foot retail building and up to four smaller buildings ˆ and says he has deals with two national chain restaurants that he can't yet name.
It's still unclear, beyond the proposed Dollar Tree, what potential uses Shaw's will pursue for its former location as well as the old Ames site. A Shaw's spokesman declined to discuss the company's real estate strategy in detail, citing the need to protect itself from competitors, but said the company was still in the due diligence stage with both properties, trying to determine the best approach to take for each site.
The downtown effect
But the possibility of several new, national chains taking up residence in vacant big- and medium-box stores ˆ at the same time new big boxes like Lowe's continue to go up on the outskirts of both cities ˆ raises the question of whether such retail development will threaten Lewiston-Auburn's longstanding efforts to revitalize their downtown districts. Both Lee Feldman and Lincoln Jeffers, deputy director of Lewiston's economic and community development department, insist that big-box and mall-area development complements their cities' overall development plans. For starters, both say their downtown development plans call for attracting different types of retailers: small, locally owned specialty shops and boutiques, rather than the national chains that are suited for mall areas.
In addition, both cities believe they still have plenty of room for retail development without overshadowing their downtowns. The city of Auburn's mall-area development plan, adopted in 2000, estimates the city can handle more than 500,000 sq. ft. of new retail development around the Auburn Mall, according to Feldman. Likewise, Lewiston officials reviewed existing zoning ordinances about 18 months ago and determined that 30 acres of land previously zoned for industrial use near Exit 80 on the Maine Turnpike would be better suited to retail development, and the area was rezoned accordingly.
And if the recent spate of national-chain activity makes the contrast between the outskirts of Lewiston-Auburn and the empty storefronts on Lisbon Street and in downtown Auburn seem more glaring, Jeffers notes that the delay is in some ways by design. In Lewiston's case, the city's first revitalization push focused on convincing companies and professional services firms to open offices downtown, with the idea that retail would follow incrementally once the daytime population can support it. "For retail to thrive downtown, you need bodies to frequent the stores," says Jeffers. "We're now getting to a critical mass of people working downtown."
Even with favorable market trends and a push to attract smaller tenants, though, new retail stores may not arrive in L-A this year. That's because national chains need to be up and running by Thanksgiving weekend, the start of the crucial holiday shopping season. And if a chain can't get a lease signed, the building renovated and the store opened by that date it will delay taking occupation until the following spring, according to Young. He believes it's still possible to find a tenant in time to meet that schedule, but says it's likely to take two years to completely renovate and fill the old Auburn Wal-Mart if it is subdivided.
Whatever the time frame for that building and Shaw's two holdings in Lewiston, retail trends make it almost certain there will be more big-box subdivisions around Maine in the future, says Blount Hunter. With several national chains currently battling head-to-head in their respective sectors, further shakeouts are inevitable, the way Wal-Mart and Target helped knock out older chains like Ames ˆ and that means developers likely will be looking to recycle former big boxes, national drug stores, regional grocery stores and other empty shells. "There is going to be more surplus real estate on the market," says Hunter, "because all of these buildings were built at a time when there were several competitors trying to become survivors in their categories, and not all of them will succeed."
Now, though, the redevelopment strategy proposed by George Schott, a local business owner and real estate investor who bought the building late last year, makes it likely the space won't be filled by another big-box retailer, but by several, smaller national chains. With ongoing efforts to find a single tenant for the space proving unsuccessful so far, Schott and his real estate broker have been focusing their efforts on subdividing the big shell into as many as three smaller, 30,000-square-foot stores.
The plan acknowledges the fact that even as the Lewiston-Auburn area has become a more attractive location for retailers, many of the national chains that tend to cluster around mall areas ˆ Linens 'n Things or Dick's Sporting Goods, for example ˆ still are missing from the L-A market. And those stores simply don't need as much space as Wal-Mart used to occupy. "There are not many retailers of that [big-box] size beyond the Wal-Marts, Kohl's, K-Marts, et cetera," says Craig Young, a broker with CB Richard Ellis/The Boulos Company who is marketing the former Wal-Mart for Schott. "But you have plenty of secondary guys who are very successful, but only need 30,000 to 40,000 square feet."
Across the river in Lewiston, at least two other big- and medium-box buildings also may be broken up for multiple tenants. Shaw's Supermarkets ˆ which built itself a new Lewiston store last year ˆ is marketing its 42,000-square-foot former location as a two-tenant building, and already has a tentative agreement with Dollar Tree, a discount variety store, to take over 19,300 sq. ft. there. Shaw's also owns the 73,000-square-foot former Ames department store at the Lewiston Mall, which it bought in 2002, and is actively marketing that space as a potential subdivision opportunity.
Breaking up disused big boxes has become common around the country, as Wal-Marts have molted and morphed into supercenters, and K-Mart and Ames locations have collapsed under pressure from the retail giant. But the potential reuse of the Wal-Mart, Ames and Shaw's locations in Auburn and Lewiston tells planning and development officials from both cities that their retail sector is emerging as an important regional hub. With roughly 500,000 people ˆ nearly half the state's population ˆ living within a 30-mile radius of the Twin Cities, existing retailers already draw shoppers from as far away as Farmington, says Lee Feldman, director of Auburn's planning department. The chance to cluster more national, but not necessarily big box, retailers around existing giants could capture even more retail dollars that area residents might otherwise spend in the Maine Mall area in South Portland. "If we can provide the same stores and services, it certainly makes it more convenient for people from Turner, Livermore and other locations to drive here rather than driving to the Portland market," Feldman says.
At the same time, though, Craig Young and other real estate experts say the urge to subdivide has more to do with broader retail trends than anything specific to the L-A area. Wal-Mart supercenters tend to attract copycat retail developers looking to capture some of those stores' traffic, says Young. Likewise, national chains have practically saturated larger markets in the Northeast, and increasingly are looking for expansion opportunities in places like Maine.
Those trends could work to local developers' advantage as they try to find lucrative second acts for these buildings ˆ which isn't always an easy task. "In circumstances where big-box stores can be carved up for smaller merchants, it's a very fortunate situation," says Blount Hunter, a retail development consultant in Norfolk, Va., "because in many cases those empty carcasses litter the landscape and are chronic problems for communities."
Reuse, recycle
Like much else in real estate, the potential marketability of empty big-box stores starts with location. Many buildings, such as empty K-Marts or Ames stores, tend to be in older, struggling shopping centers, says Hunter, and thus are not particularly attractive to new tenants. But others often are located in bustling retail strips that already attract a steady flow of shoppers. Young believes the empty Auburn Wal-Mart is one of the latter, and benefits from its close proximity to Wal-Mart's newer supercenter, as well as the new Lowe's and other stores.
Another advantage in reusing big boxes, both to developers and to city planners, is the ability to reuse previous planning, traffic management and construction work. All the necessary infrastructure, such as parking, utilities, sewer and stormwater management systems, is still in place. Public roads are unlikely to need much alteration to accommodate new traffic patterns, since they've previously served a large shopping destination. "[If] it's a Circuit City and a Staples taking over the same place that a Wal-Mart once stood, you've got the same traffic and trip generation, you've got the same impervious surfaces and other features," says Feldman. "The built environment is already there."
Breaking up those stores for more than one tenant, though, can be an expensive process. Young, who envisions dividing the old Wal-Mart into three new, smaller stores, estimates owner Schott will spend more than $1 million on the subdivision, including further renovations and new landscaping. But since those alterations are cheaper than new construction, Young says he expects to lease the new stores for about $8 per square foot, not including operating costs and utilities, versus the $12 to $15 per square foot a tenant likely would pay in a new building.
Though Young says he is talking with several potential tenants for the building, he hasn't yet struck a deal with any retailer. However, Young also is marketing another recent Schott purchase ˆ a 14-acre parcel across from the old Wal-Mart building that Young says could house a 50,000-65,000-square-foot retail building and up to four smaller buildings ˆ and says he has deals with two national chain restaurants that he can't yet name.
It's still unclear, beyond the proposed Dollar Tree, what potential uses Shaw's will pursue for its former location as well as the old Ames site. A Shaw's spokesman declined to discuss the company's real estate strategy in detail, citing the need to protect itself from competitors, but said the company was still in the due diligence stage with both properties, trying to determine the best approach to take for each site.
The downtown effect
But the possibility of several new, national chains taking up residence in vacant big- and medium-box stores ˆ at the same time new big boxes like Lowe's continue to go up on the outskirts of both cities ˆ raises the question of whether such retail development will threaten Lewiston-Auburn's longstanding efforts to revitalize their downtown districts. Both Lee Feldman and Lincoln Jeffers, deputy director of Lewiston's economic and community development department, insist that big-box and mall-area development complements their cities' overall development plans. For starters, both say their downtown development plans call for attracting different types of retailers: small, locally owned specialty shops and boutiques, rather than the national chains that are suited for mall areas.
In addition, both cities believe they still have plenty of room for retail development without overshadowing their downtowns. The city of Auburn's mall-area development plan, adopted in 2000, estimates the city can handle more than 500,000 sq. ft. of new retail development around the Auburn Mall, according to Feldman. Likewise, Lewiston officials reviewed existing zoning ordinances about 18 months ago and determined that 30 acres of land previously zoned for industrial use near Exit 80 on the Maine Turnpike would be better suited to retail development, and the area was rezoned accordingly.
And if the recent spate of national-chain activity makes the contrast between the outskirts of Lewiston-Auburn and the empty storefronts on Lisbon Street and in downtown Auburn seem more glaring, Jeffers notes that the delay is in some ways by design. In Lewiston's case, the city's first revitalization push focused on convincing companies and professional services firms to open offices downtown, with the idea that retail would follow incrementally once the daytime population can support it. "For retail to thrive downtown, you need bodies to frequent the stores," says Jeffers. "We're now getting to a critical mass of people working downtown."
Even with favorable market trends and a push to attract smaller tenants, though, new retail stores may not arrive in L-A this year. That's because national chains need to be up and running by Thanksgiving weekend, the start of the crucial holiday shopping season. And if a chain can't get a lease signed, the building renovated and the store opened by that date it will delay taking occupation until the following spring, according to Young. He believes it's still possible to find a tenant in time to meet that schedule, but says it's likely to take two years to completely renovate and fill the old Auburn Wal-Mart if it is subdivided.
Whatever the time frame for that building and Shaw's two holdings in Lewiston, retail trends make it almost certain there will be more big-box subdivisions around Maine in the future, says Blount Hunter. With several national chains currently battling head-to-head in their respective sectors, further shakeouts are inevitable, the way Wal-Mart and Target helped knock out older chains like Ames ˆ and that means developers likely will be looking to recycle former big boxes, national drug stores, regional grocery stores and other empty shells. "There is going to be more surplus real estate on the market," says Hunter, "because all of these buildings were built at a time when there were several competitors trying to become survivors in their categories, and not all of them will succeed."
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