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Big Box Stores Still Hold Value, Experts SayLock Icon

5 min read

The demise of bix-box retail is a bit overstated, Steve Lane says.

The managing director of Colliers International’s northwest Arkansas office should know. He is busy trying to find a new tenant for the former Sears location at the Fayetteville mall, a 137,000-SF space that Sears vacated early this year.

“In the world we’re in, junior anchor big box, demand is really strong — despite all the internet tales — for value-oriented tenants,” Lane said. “Toys R Us may go away, but we have a whole bunch of the value-oriented guys who are looking for space.”

And the most important aspect of big-box tenants is that when they are looking for space, they are all generally looking at the same handful of properties. That’s because with the increasing costs of construction and property, companies find building a suitable facility prohibitively expensive.

“No one is building a whole lot of new big boxes,” Lane said. “They generally have value — it’s all based on the location and strength of the market — and we are seeing a lot of competition in those markets for vacant big boxes when they open up, provided the landlord has capital to make changes to that building, because you have to get new retailers what they want.”

When Walmart Inc. of Bentonville announced in 2016 it was closing nearly 150 stores, including all of its Walmart Express sites, the properties were quickly scooped up by competitors such as Harps Food Stores of Springdale and Dollar General of Goodlettsville, Tennessee. The Express sites were smaller than the traditional big box, from 12,000 to 15,000 SF, and were mostly located in small towns nationwide.

One Express in Prairie Grove was purchased by Harps, which already has a store in the small town in western Washington County. Harps held onto the property for a while before selling it for $750,000 earlier this year to the city of Prairie Grove, which plans to convert it into a library.

Options to Lure Tenants
Lane said a big-box location gives sellers or lessees — in the Sears case, Colliers is handling lease arrangements for the mall owners for a new tenant — several options.

The easiest option is to simply sell or rent the location to a single company that uses the space much the same way the previous occupant had. This option requires less renovation and overhaul than having to convert the space to another use or multiple uses.

When Jordan Jeter and his partners bought the former Marvin’s IGA in Farmington in 2016, he knew all the different scenarios for renting the place out. Jeter, a partner with Flake & Kelley Commercial Northwest, heard offers from single retail companies but also looked into dividing the 23,000-SF building for multiple tenants.

As it turned out, Jeter was surprised by his eventual tenant, Brand New Church, which signed a multiyear lease and moved in earlier this year. Jeter said the church even paid for all the interior renovation and put in a child care facility.

“It looks phenomenal,” said Jeter, who paid more than $1.1 million for the property. “It’s worth more now than when we bought it. We don’t care if it’s a church or an auto store as long as they pay their rent.”

Lane and his Colliers colleague, Alan Cole, are scouting and recruiting potential tenants for the Sears mall location. The Sears location offers several appealing options for potential tenants.

“The Sears has its own external entrances so you could break that building up and have retailers facing College Avenue that have separate storefronts that you could enter into,” Cole said. “There is a lot more than a space is vacant and should be full. A lot of people are hiring specialists to work on their property because it takes so much more to lease a vacant space and figure out all the moving pieces.”

Cole and Lane weren’t surprised that Jeter ended up leasing his property to a church. Farmington has a Walmart Neighborhood Market located less than two blocks from the former Marvin’s IGA, and even though Farmington is a growing bedroom community, the city isn’t quite ready for two big-box retailers.

“It’s not a one-size-fits-all,” Lane said. “If it is in a small town, it’s just a building. If it is in a smaller market and it is a standalone box, that gets a little tougher.”

Property Patience
Sherry Johnston also doesn’t care if her town’s big box is filled by a church or an automobile parts store.

Johnston is the city clerk and treasurer in Waldron, the county seat of Scott County but otherwise a small town in the middle of a sparsely populated area. When Walmart closed its store — a pre-SuperCenter 50,000-SF store — Johnston said it devastated Waldron like a divorce.

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The rest of the town’s merchants, which included a Harps, a Dollar General and a Walgreens-sponsored local pharmacy, picked up the slack. The city, though, lost nearly 100 jobs and all the monetary benefits that come from Walmart: sales tax revenue, sponsorship for local teams and grants.

And the building on West Second Street still stands empty.

“The mayor [Neil Cherry] called hundreds of retailers, anybody he could think of, anybody anyone suggested to him,” Johnston said. “He said, ‘Hey we’re a great community and our Walmart has left.’ He would cold call them.”

Johnston said things are looking up in Waldron.

There is a strong rumor that the building has been sold to a developer who plans to convert the box location into three separate businesses.

“It’s a little awkward — we had people in our community telling us what we needed to do with the building,” Johnston said.

“We had to remind them we don’t own the building. We can’t do anything with it. We are encouraging retail and even some manufacturer to make use of it.”

Cole said retail development sometimes takes longer than the general public thinks it should. Cole and Lane are handling the marketing of a former Kmart on Sunset Avenue in Springdale, a 60,000-SF building that has been empty since 2016.

“There are a lot of different moving pieces on that deal,” Cole said. “The building could have been split and leased a couple of different times with the amount of interest in the property. It’s a special case with the lease on the place. When people drive down Sunset and say there’s a ton of traffic and a lot of retail, why hasn’t that place filled?”

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