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Real Estate by Josh Brodesky: Future of big-box stores may be iffy

Real Estate by Josh Brodesky
Tucson, Arizona | Published: 01.11.2009
Editor's Note: Starting today, the weekly real estate column will run on Sundays. Find a weekly listing of commercial sales and leases on Tuesdays in Business.
No doubt this year will be a challenging one for retailers.
Already major chains like Wal-Mart Stores Inc. have pared down forecasts, citing soft December sales in a plunging economy.
But while there will be plenty of retail turnover in the coming year, will 2009 also mark a shift away from the big-box/anchor- store concept?
There are many in the retail sector, although certainly not all, who see these large boxy stores as an endangered species. The argument essentially is that they are now more "dino-stores" than superstores — a design and concept that thrived in the '80s and '90s, but may not survive this recession or the Internet because they are large, generic and costly.
Already we've seen Mervyns and Linens 'N Things close, Circuit City file for bankruptcy and Michigan-based Borders Group Inc. hire a new CEO in the hope of turning around sales for the struggling bookseller.
The challenges anchor stores face, particularly in a recession, are many. It costs a lot to take up so much space, and it can be hard to compete with the Internet where customers can shop and compare prices. Many box stores, like Borders, are too big to be unique.
So, some are saying the scramble is on to find that next new concept to attract shoppers.
"I think (having) these big events — the recession and the shrinking of the industry — ultimately makes for a stronger industry, but it also opens up a new opportunity, and there are a lot of smart people out there that will try things," said Michael P. Niemira, vice president and chief economist for the New York-based International Council of Shopping Centers.
Niemira said he doesn't see any changes to the big-box concept for the coming year, but certainly in the next five or 10 years.
"I wouldn't think it could happen with the short term with leases and everything else," he said. "I think there is some merit to (stores downsizing) for the long term."
The coming sea change in the retail landscape has prompted the International Council of Shopping Centers to form a think tank to look at long-term ideas and plans for new types of spaces.
So what will some of those changes be?
Well, Niemira said he wished he knew, and if he did know he probably wouldn't be telling a reporter.
But a recent report from Ohio-based market research firm TNS Retail Forward said it expects chains to start offering multiple formats and concepts in an attempt to localize themselves.
Packaging and products will also be localized, and the spaces that stores lease may become smaller as chains become more specialized, the report says.
Full disclosure here: I tend to be allergic to shopping, so the idea of big chain stores downsizing to something smaller and more manageable or making themselves more local and unique is sort of appealing.
But Craig Finfrock, a broker with Commercial Real Estate Advisors, said he doesn't see any change to Tucson's retail landscape any time soon.
"I think your bias is entering into your vision," he said.
Finfrock said he expects plenty of box store spaces to open up nationally and locally in the coming year, but he sees discount chains that are doing well, or at least OK, in the recession filling those spaces.
"It's musical boxes," he said. "My personal opinion is that the larger stores have better purchasing and therefore can offer the consumer better prices, and in the economic downturn, pricing is what is going to be key."
Pete Villaescusa of CB Richard Ellis said he's also heard the rumblings that the big-box stores are going the way of the dodo bird, but he said the problems are really due to over-expansion and the recession, not the big-box model itself.
"They certainly have had some big expansion over the last 10 to 12 years especially, and so I think that's part of it," he said.
Time will tell how it all shakes out for our power centers and category killers, boxes and anchor stores, chains and pavilions — at least they have given us nifty lingo, if not always a happy shopping experience.
But one thing everyone agrees on is those chains and stores that do adapt to the recession will have stronger market share in the years to come. So, in that sense, the space stores do choose to fill today could play a huge role in our retail landscape.
"For the retailers, '09 is a continuation to an adjustment phase," Niemira said. "In the long term, from that you will have opportunities, and that's what we need to focus on."
● Josh Brodesky covers real estate for the Star and writes a weekly column on the industry. Send news about commercial and residential real estate to him at jbrodesky@azstarnet.com or call him at 573-4178.