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What’s in store for empty retail spaces?

August 27, 2018

Rochester shoppers picked through the remains of the cavernous Herberger’s store for the final time on Sunday before it followed many other once-popular retailers and closed its doors for good.

The closure means Rochester now has a two-story, 91,400-square-foot anchor store at the Apache Mall available for a new tenant.

However, mall owner General Growth has some local competition when fishing for the type of tenant that might want that much space in the Age of Amazon.

Toys ‘R’ Us closed its nearby 45,628-square-foot store at 808 Apache Lane SW in June and is also looking for a new owner or tenant. The seasonal retailer Spirit Halloween is temporarily filling the ex-toy store through October.

While those are two recent closings, there are two other “Big Boxes” left empty by the national chain closures of the 50,000-square-foot Dick’s Sporting Goods and the almost 77,000-square-foot Gander Mountain in 2017.

The big question for building owners and local shoppers is who might be interested in moving into those large buildings.

Space suitors?

Many department store chains are struggling to find their place in today’s evolving retail economy. However, some companies, like TJ Maxx/Marshall’s, Dollar Tree and others are flourishing within their niches.

Marshall’s is coming into Rochester in a new center being built by Twin Cities developer Ryan Co. that will also house an Ulta beauty store and a Carter’s children clothing store.

Some chains of workout gyms, like Planet Fitness, have become strong potential candidates for ex-retail spaces in recent years.

Ironically, a grocery chain now owned by online giant Amazon is now a potential candidate for spaces like these. Whole Foods has seriously looked at the Rochester market for many years without ever locking down a spot.

It’s possible a space like the empty Toys ‘R’ Us could work for the high-end grocer.

While those four empty stores represent a lot of empty space, commercial Realtor Mike Haley of Braasch Commercial Real Estate says it really doesn’t reflect poorly on Rochester.

“The space open in Rochester is the byproduct of national chains who had trouble at the corporate level. The economy is rolling along here. I’m very optimistic,” he said. “However, there are not as many fish swimming in the ocean that want 25,000-square-feet of retail or more.”

That means filling those buildings may take a while.

“They will be full… at the expense of time. It’s a match game now. It’s just about finding the right match,” said Haley.

Competitive field

Of course, the owners of the empty spaces have another challenge in getting a large tenant to sign a lease — each other.

There’s always a lot of competition for those players who will take on long-term leases for big buildings, but the current market seems pretty crowded at the moment.

“I think you have an opportunity to backfill these spaces,” said Rochester Economic Development Inc. President Ryan Nolander. “But it’s going to be the retailer’s market.”

Apache Mall owner General Growth Properties has plenty of experience in finding tenants to fill big spots.

When it opened in 1969, the mall lured JC Penney and Montgomery Ward from Rochester’s downtown to serve as anchors.

When Montgomery Ward closed in 2001, Herberger’s replaced it a year later.

In early 2014, Sears closed its then-133,000-square-foot store. Scheels All Sport stepped and actually expanded the former Sears space and opened there in 2015.

Like Haley and Nolander, Rochester property manager Blair Meek of Professional Management Inc. is confident new tenants will fill those buildings. However, it might take some creativity to make that happen.

His father, Bob Meek, and Vic Scott got creative in 2003, when the 62,000-square-foot Rainbow Foods closed its doors as an anchor of their Crossroads Shopping Center.

Instead of luring a similar-sized tenant, the Crossroads team put in demising walls and divided the utilities to divide the grocery store into three spots.

While not a cheap move, it did result in attracting three new stores — Aldi, Savers and Dollar Tree — to the center in 2005.

Splitting up the 33,000-square-foot former Sports Authority in southeast Rochester also worked in 2017 to fill it with Petco and Five Below as tenants.

“It’s still supply and demand. The supply is starting to get higher than the demand side,” said Meek. “So you get creative and do what you have to do to get a tenant in there.”

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