Q&A: Vacant big box spaces continue to attract new tenants
A tight real estate market and rising construction costs are an ongoing challenge for new development, but vacant big box spaces continue to be an attractive avenue of retailers and brands looking to expand.
Jake Wiseman, sales and leasing associate at Michigan-based commercial real estate services firm NAI Farbman, spoke with Chain Store Age to discuss the current backfill landscape and which types of tenants are bringing the most value to shopping centers.
How important is store location for retailers in today's environment?
Location remains the single most important factor for retailers, though what makes a location "great" has evolved. Today's retailers are drawn to sites with strong visibility, easy access, healthy traffic counts and a tenant mix that keeps consumers coming back. Demographics, daytime population and proximity to other destination retailers matter more than ever. And with fewer new developments being built, well-located existing centers have only grown in value.
When it comes to big box spaces, how have adaptive reuse strategies evolved?
Adaptive reuse has become far more creative over the past several years. Where these buildings were once back filled almost exclusively by another traditional retailer, today's buyers and tenants are thinking well beyond retail.
[READ MORE: Q&A: Steiner + Associates' Spencer Jordan on retail's evolving site selection strategy]
We're seeing former department stores and big-box buildings reimagined as self-storage facilities, medical offices, educational space, entertainment venues, fitness concepts, churches, municipal facilities, industrial showroom space and even mixed-use developments. Owners are increasingly willing to reposition an asset rather than hold out for a traditional retailer that may never come.
What types of tenants are emerging as powerful traffic drivers for big boxes within shopping centers?
We're seeing a broader, more dynamic mix of traffic-driving tenants than ever before. Discount retailers like Ross Dress for Less, Burlington, TJ Maxx and Ollie's are continuing to expand.
Grocery also remains one of the strongest anchor categories. Experiential and service-oriented uses are strong traffic drivers too, as well as secondhand retailers like Goodwill, The Salvation Army and Volunteers of America. All these concepts are successfully activating large spaces and driving consistent foot traffic.
Are rising construction costs changing the economics of subdividing large, vacant boxes?
Yes, and it's requiring owners to be more strategic. Subdividing a large box has become more expensive, but done thoughtfully, it can significantly expand leasing opportunities and improve a property’s long-term value — even with the higher upfront investment.
The key is making sure the economics justify the cost. We're seeing owners lean toward smart, demand-driven subdivisions rather than maximizing the number of spaces for its own sake.
In the Midwest specifically, what is the next generation of big-box users based on the activity you're seeing?
We're seeing growing demand from self-storage operators, healthcare providers, educational institutions, nonprofits, fitness concepts and entertainment users. Across many Midwest markets, redevelopment has become just as important as traditional retail leasing. Rather than betting on a single large retailer to fill 100,000 square feet, owners are increasingly repositioning properties with multiple users that better reflect how consumers behave today.
