The United States is now littered with thousands of empty big-box stores and hundreds of vacant shopping centers and malls.
Part of what’s fueling this epidemic is that, in their quest for greater market share, chains like Wal-Mart and Home Depot have built far more retail space than consumers can actually support. Between 1990 and 2005, the amount of retail space in the U.S. doubled, while per capita income, adjusted for inflation, grew by only 28 percent.
Also contributing to the problem is that fact that many chains reinvent themselves every decade or so, abandoning their older outlets for new formats. Wal-Mart, for example, has been vacating its earlier generation of stores to build supercenters that are twice as large and include a full grocery department. As of November 2011, the company had 152 vacant or soon-to-be-vacant stores across the country.
These derelict boxes tend to remain empty for many years, causing blight and eroding nearby property values. Retailers often hang on to these empty buildings or, in the case of leased sites, continue to pay rent, in order to prevent their competitors from occupying the locations. Cities occasionally find non-retail uses for these old shells, but that’s relatively rare.
What can communities do to prevent vacant boxes?
Limit excessive retail development
Curbing the construction of new big-box stores and shopping centers is the only real solution to the epidemic of retail vacancy. Cities and towns need to recognize that the vast majority of new retail development projects proposed today are driven not by growth in consumer spending, but by the developer’s belief that the new store or shopping center will grab market share from established businesses, which in turn will contract and close.
Most cities and towns have zoned far more land for retail than they actually need or can support. As chain stores sprawl on the fringe, older shopping centers and historic business districts almost invariably struggle and decline. The fastest to end up with a vacant 100,000-square-foot Wal-Mart store is to approve a new Wal-Mart supercenter.
Limiting where and how much land is open for retail development, especially big-box stores, forces retailers to redevelop existing centers rather than leaving them vacant and moving on to undeveloped property. It also encourages developers to employ higher quality, more durable construction and to make maximum use of the available land (by, for example, developing multi-story buildings that have offices or housing in addition to retail).
In addition to limiting how much land is zoned for retail, cities can also use store size caps to prevent big-box sprawl and economic impact review requirements to analyze the need for new retail stores before projects are approved.
Require a “demolition bond” for new retail development
Some cities now require that retail developers set aside money in a performance bond, which is held in escrow and can be used by the city to demolish the structure and maintain the site should the store or shopping center become vacant. See examples from Oakdale, California, and Wauwatosa, Wisconsin, below. Similarly this agreement [PDF] between Inver Grove Heights, MN, and Walmart states that if the store closes, Walmart has three years to remarket the store or return the site to its pre-development condition.
Insist that vacant stores go on the market
Often retailers continue to pay rent after they have vacated a building in order to block a competitor from taking the location. Or they may include clauses in their leases that require the property owner to obtain their approval before renting the site to a new tenant.
Some cities have adopted ordinances that prevent this by mandating that landlords are free to place retail properties on the market as soon as they become vacant.
These ordinances make no difference if the retailer owns, rather than leases, the property (this is less common, but true in perhaps 15 percent of the cases). They also are ineffectual if there is no market for the abandoned store, which is common given how much open space is currently zoned for retail development, the limited number of companies that are suited for stores several acres in size, and the fact that most retailers prefer to build new structures to suit their specific formats.
Mandate that stores be designed for re-use
Bozeman, Montana, requires developers of retail stores of 40,000 to 75,000 square feet in size to submit plans for re-using the structure should the original tenant leave. (Stores over 75,000 square feet are prohibited altogether.) The city’s ordinance mandates that developers include specific design elements when constructing large stores to facilitate re-use by multiple tenants (e.g., provision for interior subdivisions and multiple entryways). These plans are reviewed as part of a conditional use permitting process.
This approach has its limits too. It will not help if the owner does not wish to redevelop and release the property, or if there is no market for the abandoned site.
- Big, Empty Boxes — Op-ed published in the Minneapolis Star Tribune on Jan. 15, 2009.
- Sharp Rise in Shopping Center Vacancies — Article for Main Street News, August 2008.
- Also see Chapter 4 of Big-Box Swindle.