Retail vacancies in area soaring
2/25/2006When a Southwyck-area home and garden boutique closed late last year, no one was more disappointed than landlord Burt Kalniz.
"It's boarded up and we might tear it down," he said of the building in the once fashionable area where the most recent businesses to join ongoing retail flight include the boutique, a convenience store, a dollar store, and other tenants in a fast-emptying mall.
Retail vacancies in metro Toledo last year rose to levels not seen since the last recession in a market best described as feast or famine, a new industry report shows. The percentage of empty stores and other retail buildings shot up to nearly 14 percent at year's end, according to the commercial realty CB Richard Ellis, Reichle Klein, of Maumee.
At the end of 2004, vacancies were at 11 percent. They last topped 13 percent at the end of 2001, just after a recession.
While some neighborhoods, such as the area around popular Westfield Franklin Park, continue to thrive, many landlords struggle to fill vacant buildings.
Vacant space includes big box stores on Airport Highway, Laskey Road, and Heatherdowns Boulevard left by the Farmer Jack and Food Basics supermarket chains when they exited the area last year, as well as abandoned theater complexes on Secor Road and Monroe Street.
Adding to the glut: the closure of the Media Play chain this year emptied two more big boxes on Monroe Street in Sylvania Township and Airport Highway in Holland.
"You're seeing a big shift in the spending patterns of consumers," said Dave Long, a retail expert with CB Richard Ellis.
Real estate experts point to several major developments, including changing shopping patterns that forced two traditional grocery chains out, continued construction of shopping centers that lure tenants from existing centers, and the ongoing shift of retailing from older Toledo neighborhoods to the area around Franklin Park and fast-growing retail districts in the suburbs.
While population in the metro area has not increased, retail construction has boomed over the past five years. The amount of space rose 13 percent to 18.3 million square feet, CB Richard Ellis said. The biggest gains were made in Perrysburg and Northwood, where retailers have added 1 million square feet for a 66 percent increase.
Still, there is conflicting data about the number of empty stores and in key corridors.
CB Richard Ellis said vacancies range from 9 percent in Perrysburg and Northwood to 16 percent in West Toledo and Sylvania as well as east Toledo and Oregon.
Rival Michael Realty Co. of Toledo, which uses different neighborhood classifications, reports that Perrysburg has the lowest vacancy rate, at 2 percent, and southwest Toledo has the highest at 13 percent.
Neither firm's estimates include space in very small buildings and CB Richard Ellis excludes malls and free-standing restaurants.
Area retail rents slipped to an average of $7.14 a square foot per year in December from $7.43 a year earlier, CB Richard Ellis said. But rates vary widely depending on the neighborhood and whether the space is a small- to mid-size shop in a strip center or the main, or anchor, tenant.
In Perrysburg/Northwood, anchors were fetching $4.89 a square foot compared with $17.19 for smaller buildings.
Meanwhile, retailers continue to erect big boxes. The Wal-Mart chain's first super center, carrying a full-line of groceries, is under construction in Holland. Another such store is planned for Perrysburg. The Costco chain is seeking approval to put up a warehouse club store in the Westgate Village Shopping Center.
Despite rising vacancies, some landlords said they are having little trouble filling space.
Since buying the Parkway Plaza shopping center in Maumee this month, real estate investor Ramy Eidi has landed a tenant for a vacant big box that formerly housed Value City Furniture.
He is finalizing lease details with several tenants who are moving to the older strip center, which is undergoing a major overhaul, he said. He declined to name the tenants.
Retailers, he said, want centers that are "newer-looking, renovated, and well-tenanted."
Harvey Tolson, who owns a multi-million dollar real estate portfolio in Ohio and Michigan, doesn't see a major problem with retail vacancies in the area.
"No matter where you go, there's a vacancy someplace," said the man who is landlord to Wal-Mart on Glendale Avenue in Toledo. "If you have properties that are tired and they sit in challenged areas in older neighborhoods, they're more difficult to lease."
Joe Belinske, of Michael Realty, agreed the local retail market is going through difficult times, but contended that vacancies aren't as high as the CB Richard Ellis report suggests. Estimates by his firm suggest they are half the level suggested by the rival real estate agency.
"There is been a bit of attrition among mom and pop stores," he said, in part, because potential customers have less disposable income.
Owners of empty big boxes will have difficulty finding tenants because grocers not now in metro Toledo are unwilling to take on the dominant Kroger Co. or Wal-Mart, Mr. Belinske said. And the boxes are too big for apparel stores, he added.
An additional factor, which may serve to keep the buildings empty, is that former tenants continue to pay rent under long-term leases in many instances, said Steve Serchuk, a retail expert with the Toledo office of Signature Associates.
"They're not being aggressively marketed," said the agent, who estimates that there are 10 vacant supermarkets in the metro area. Commercial real estate agents said at the time of the grocery chains' departure that the stores likely would be easily rented, given the good locations.
Most construction is for specific tenants, not space built hoping to find tenants, said Mr. Long of CB Richard Ellis.
Retail experts are closely monitoring developments in the Westgate and Southwyck areas.
Most would like to see Costco be approved as part of a larger plan to redevelop the center, which in turn could help development in the nearby area.
Real estate agents also are waiting for a promised redevelopment plan for the struggling Southwyck Shopping Center by developer Larry Dillin.
Contact Gary Pakulski at:
gpakulski@theblade.com
or 419-724-6082.