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Plenty Of Stores But Where Are The Customers?

08/19/2011

Too many stores – not enough customers. Overbuilding of retail space combined with an anemic economy has created a retail glut.

Across the country there is plenty of vacant retail space. But a trend towards vacancies receding seems to be occurring. The U.S. retail real estate vacancy rate held steady at 7.1 percent at mid-year as retailers continued to positively absorb modest amounts of space in an environment of increased retail sales and almost no new construction.

The 800 pound gorilla in the room is known as “big box”. Vacant big box space is a very difficult sell. In the Chicago market, there are 175 vacant retail big boxes which total 9.5 million square feet. Unfortunately, Chicago is not alone. 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 fueled 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.

Re-use solutions for vacant big box space are varied. Churches, schools, government offices are common renovations. In Austin, MN the Spam Museum renovated a vacant K-Mart. The Spam Museum, according to their website, “Is dedicated to the delicious meat first created at the Hormel Foods Corporation plant in 1937. It’s a fun and informational destination with interactive and educational elements designed for all ages. And it’s FREE!” Sounds like a perfect use for an old K-Mart.

It is likely it will be another 3 to 5 years before the glut of vacant retail space is absorbed. This will be aided by economic improvement and retail innovation. Retailers need to bring their A game to the market to stimulate business.

After all, customers are not optional.

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