The larger the retail space, commercial real estate brokers say, the harder to sell. Which is why the three former Boscov’s spaces in Greater Baltimore that went up for auction this week didn’t move.
While former Circuit City stores and Linens ‘n Things locations are finding occupants — and second-quarter vacancy rates for retail improved slightly — big empty storefronts like Boscov’s still can’t seem to lure retailers who can fill them, a stubborn commercial real estate trend illustrated recently in “The Big Box Dilemma,” a Colliers International report on big box retail.
“When you get to essentially over 100,000 square feet, there are few users out there looking,” said Garrick H.S. Brown, retail research director for Colliers International, a real estate services firm, and author of “The Big Box Dilemma.”
“We’re seeing this expansion in the [50,000 square feet to 70,000 square feet side] but we may see more big box vacancy in the month ahead,” Brown says.
The White Marsh Mall Boscov’s totaled 219,996 square feet of space, while the Owings Mills Mall store was located in a 293,060-square-foot building and the Marley Station location totaled 274,050 square feet. But size isn’t the only issue with the locations, according to industry experts. The three department store locations are all tethered to shopping malls, which tends to keep away discount retailers such as Target, who don’t want to be accessible through a shopping center.
“When you look at the Targets who have moved into some malls, [the setup has] been onerous,” said Walter Bialas, an analyst with CoStar Group, a market research firm. “Some have tried splitting the floors up but it becomes harder to reuse that big box mall space from a physical standpoint.”
It worked one time recently when Costco took up space in a former Hecht’s store at Wheaton Mall, said M. John Meyer, a principal with KLNB Retail. But that’s an exception.
“I think boxes in some of the ‘B/C’ class malls are the one segment that is really challenged,” he said. “Costco in Wheaton is the exception, but even that took a very long time.”
Brown said big box retailers are primarily eyeing 50,000-square-foot location and retailers such as Walmart, which has plans to open 400 stores this year and next, are even tweaking their footprints to take advantage of deals in this size category. A typical Walmart is 125,000 square feet to 175,000 square feet, but now the chain is looking at space as small as 25,000 square feet, according to Brown.
“A lot of these retailers who had these footprints set in stone are throwing them out the window,” he added. “All this activity will help us absorb the smaller box space.”
The retail segment in Baltimore has improved slightly over the last year. Second-quarter vacancies totaled 6.4 percent, down from 6.6 percent in the first quarter of the year, according to CoStar’s mid-year retail report.
Some of that improvement was fueled by big box activity in the region — Forever 21’s move into one of the former Boscov’s sites, as well as ShopRite taking up space at Chesapeake Square Shopping Center in Glen Burnie and Toys “R” Us moving into 6100 Dobbin Rd. in Columbia.
“In this market, we’re in a good position with our big boxes getting filled,” said Bill Holzman, director of retail leasing for St. John Properties. “It’s the reason why, compared to other parts, we’re still desirable.”
The retail sector may be on the rise but commercial real estate brokers aren’t exactly throwing a party yet. While they admit that retail space is filling up and clients are expressing interest in looking for even more space in the Baltimore and Washington markets, the deals are moving slowly.
“Most recently, it seems like the attitude has shifted to a more negative attitude,” Meyer said. “That’s probably a function of national issues that are hanging out there. We’re better off than most but some things are not moving along as well as we hoped.”
Bialas said he expects vacancy rates in Baltimore to remain the same or decrease slightly in the third quarter, but still remain above 6 percent.
“Retailers in Baltimore and D.C. haven’t really started expanding again like they have in the past,” he said. “The consumer is somewhat sidelined in terms of how they’re portioning out their family budgets.”