Most days, commercial real estate agents Steve Serchuk and Mark Zyndorf spend their time helping to sell property, not purchasing it.
But when the former Lone Star Steakhouse at 5640 Airport Hwy. recently became available, the two decided that now was a good time to buy.
“The former owner only saw this as a problem. We saw it as an opportunity,” Mr. Zyndorf said of their $425,000 purchase on Aug. 24 of the 5,300-square-foot restaurant that closed three years ago.
The opportunity that both men see is a sudden resurgence in retail expansion in the Toledo area, the likes of which hasn’t occurred since before the recession started in December, 2007.
“Things are definitely changing. If you look at the retail numbers that have come out, in the past 12 months they’re far better than the previous 24 were,” said developer Ken Hicks, Jr., of Diverse Development, Holland. “I was down in Columbus a month ago at a convention and I spent the whole time down there making deals,” Mr. Hicks said.
Developer Joe Swolsky of RL West Properties in Toledo agreed that retail in the area is expanding again after a two or three-year hiatus.
“There’s not a lot of big boxes, like Walmart or Menards,” he said. But medium to smaller retail chains are expanding again and have targeted multiple sites in the area for new stores or expansion of existing ones.
In its June midyear report on the state of the Toledo-area retail market, local commercial real estate firm Reichle Klein Group noted that “Toledo’s retail-space market is showing signs of awakening,” with retailers and shopping center owners reporting increased sales.
The firm’s retail survey showed that the overall market vacancy rate fell to 14.5 percent from 14.7 percent in December. More important, over the first six months of 2012, the vacancy rate for the area’s small shopping centers and strip malls dropped to 16.8 percent by June from 18.3 percent in December.
“There is a lot of activity now and I think there'll be even more activity after the election. We’re seeing a lot of smaller space, 1,200 to 1,500 square feet, being used,” said Joe Belinske, a commercial real estate agent at Reichle Klein. “You have more national franchises coming to town, whether it be a restaurant chain or something else. You’re getting a little bit of everything.”
Start of resurgence
The resurgence began in earnest in mid-May when Michigan furniture retailer Art Van bought the 14-acre former National Amusement cinemas in Springfield Township and revealed plans to put a 90,000-square-foot store on the site. It recently broke ground.
At the end of May, CarMax Inc. completed its purchase of the former Kmart at 5956 West Central Ave. to build a new car dealership, most likely in 2013. Then in July, Shoppers World, a discount department store, leased 50,000 square feet on Manhattan Boulevard.
During the early part of the summer five smaller retailers — Dollar General, Napa Auto Parts, Dollar Tree, Five Below, and Rue 21 — committed to lease between 7,000 and 12,000 square feet each in locations throughout the metro area.
And the surge of new retailers has continued.
CVS Phamacy bought land at Monroe Street and Douglas Road to build a store, and it is searching the area for four to five additional sites, local real estate agents said.
Kroger Co., which earlier committed to building a store in Maumee on Conant Street at Dussel Road, is now seeking a site for a new store on Airport Highway so it can relocate its store from the Spring Meadows Shopping Center. Kroger is also in the midst of turning its store in Lambertville into a 133,000-square-foot Kroger Marketplace, the largest of its stores in the area.
Chik-fil-A is developing new stores on Fremont Pike in Perrysburg Township and on Talmadge Road at Sylvania Avenue in Toledo. The chain also is seeking another location on Airport Highway, local real estate agents said.
Del Taco, which has a store on Secor Road in West Toledo, is adding a store on Airport Highway.
This month, Mr. Serchuk, who has been trying to sell three former National Amusement theater sites around town since 2007, facilitated a sale of the Showcase Cinemas site on Secor Road. Developer Saad “Steve” Roumaya bought the property for $2.5 million, and his partners in Key Hotel and Property Management Inc. plan an outlay of $25 million to put a four-story, 114-room hotel, most likely a Hampton Inn, on the site. Other buildings will be constructed on the site, and Key Hotel officials said interest about occupying space on the 13-acre property has been expressed from a fitness center, medical office users, a bank, restaurants, and a pharmacy chain.
Mr. Serchuk and Mr. Zyndorf bought the former Lone Star site on Airport Highway, which is 2.4 acres, because they recognized from their recent dealings as commercial real estate agents with the Toledo office of Signature Associates Inc. that the retail market is heating up, with national chains competing once more for good sites.
“I don’t think it’s a sudden burst. I think it’s been building,” Mr. Serchuk said. “We saw it getting better. 2010 was a better year, ’11 was better than ’10, and ’12 has been even better.”
Mr. Serchuk said retail chains recognize the Toledo area’s ties to the auto industry, which is in recovery.
“I think a lot of the drivers of this is that the manufacturing businesses are doing well, the tool and die companies are doing well, everything auto-related is doing well,” he said.
Now that retailers are actively looking for sites again, Mr. Zyndorf said, the race to find good ones has accelerated. “We looked around — you can go up and down — and you’re not going to find many vacant parcels,” Mr. Zyndorf said.
Mr. Serchuk said most retailers “want land to do their own concept,” so the former Lone Star seemed a perfect site for redevelopment. The building itself is usable, but most likely the site either will be redeveloped for a single retailer or divided into two lots.
“We are already talking to three or four restaurant chains. Most don’t want the existing structure,” Mr. Serchuk said.
Mr. Swolsky said many of the vacant retail buildings in metro Toledo probably are going to be torn down in this latest retail wave, which he said he expects to gain steam in 2013 and 2014.
“I think there’s been a lot of things happening and one of the reasons is that a lot of these companies have completely retooled their prototypes. The midsize retailers have downsized their prototypes, so you have, for example, office-products people doing smaller sizes that are more efficient, and they have money to invest in these new prototypes.”
CVS, for example, abandoned the Toledo market in 2001 even though many of its stores were just two years old. But it isn’t seeking out its old locations for its return; instead it submitted plans for a new prototype recently to the Toledo-Lucas County Plan Commissions.
Tom Lemon, plan commissions director, said his agency has noticed the increase in filings by retailers and interprets it as a sign that an almost dormant sector is finally heating up again.
“It’s been a little gradual, but it’s certainly picking up. On our agenda just this Thursday we had three new stores — CVS, a new outlot at Westfield Franklin Park, and an Aldi’s on Alexis Road,” he said. “The one CVS is just the beginning. They have told us they want to come in with multiple stores, and Dollar General and Family Dollar have told us they have more sites in mind.”
“It does appear, from our point of view, that we’re seeing more activity in terms of rezoning and site plan approvals for retailers. … I think it’s a positive thing and shows the market’s attractive again,” he said.
Show of strength
A sign of the growing strength of the market is that more deals are getting done with commitments from retailers before they are built.
For example, in August a group of investors bought the former Fazoli’s restaurant at 1398 Conant in Maumee with plans to raze it and build a three-store strip center. The investors, SBW Capital Partners, already have commitments for a new Five Guys Burgers & Fries, Radio Shack, and Dunkin’ Donuts stores in their center.
Sam Zyndorf, a commercial real estate agent at Signature Associates and the brother of Mark Zyndorf, said the Dunkin’ Donuts commitment underscores the retail resurgence.
“Dunkin’ Donuts wants to come back to the market now after an absence. They want to do several stores,” he said.
“There’s no question that in the last three to six months there’s been more activity, some of it shifting activity, but some of it brand new,” he added.
Vacant space that had attracted no interest for three or four years is getting attention, Sam Zyndorf said.
A strip center in the 5500 block of Monroe Street that has sat empty for a few years just signed a lease to put in a 10,000-square-foot Paul Mitchell salon school. “If we sign a second deal that we have working, it will probably be full,” he said.
As the area’s premier shopping mall, Franklin Park has always been the bellwether of retail activity in metro Toledo.
When the mall last week sought approval for a 47,644-square foot expansion that would use the last remaining undeveloped space on its site, it unofficially signaled that the Toledo retail market, in the eyes of Los Angeles-based Westfield America Inc., is ready once more to add stores.
Sources say Westfield intends to bring two new retailers to its site, Marshall’s and HomeGoods, both divisions of TJX Cos.
However, the mall proper also has been involved in the retail resurgence and has added or will be adding nine new retailers to its lineup between this past June and December.
Julie Heigel, Franklin Park marketing director, said that since June the mall added specialty store Bumble Olive Oil, shoe and clothing store Journey’s Kidz, snowboard and skateboard apparel retailer Zumiez, and fashion accessories retailer Charming Charlie. It is in the process of adding women’s apparel retailer Funky People, food retailers Chop It Salad Co. and Jamba Juice, and beauty salon Espres’ Nails and Spa.
And apparel retailer Forever 21 is moving from its current location into the former Borders store at the mall, where it will use its new format, XXI Forever, which adds men’s clothing and requires additional space. Ms. Heigel said the mall is negotiating with another retailer to take the space now used by Forever 21.
Why retail expansion has ignited again is uncertain. But Kurt Pollex, a commercial real estate agent with Reichle Klein Group, thinks it probably is a combination of low interest rates, good locations that have sat idle for several years, a perception of pent-up demand, and retail chains that have the capital to expand and believe the economy is on the upswing.
“I think a lot of people sat back and said, ‘Let’s let this flush out for a while during the recession,’” he said. “A lot of retailers have determined that now is the time to get back in at some better rates, now’s the time to get in at some ‘A’ locations and expand while there’s still pent-up demand.”
Mr. Pollex said there are still difficulties in getting banks to lend money, but many retail chains are using their own cash or financing.
“The deals that are happening are retailer-driven; they’re not speculative in nature. The retailers are seeing an opportunity now to make a move for growth, and they’re going for it,” he said. “Before, they were sitting back and hiding just to make it through the tough times. Now they’re saying ‘We’re still here now, we survived, how do we make things grow?’”
Mr. Pollex said much of the activity of the last four months can be traced back to the International Council of Shopping Centers' annual deal-making conference in Las Vegas in May.
“It was definitely different this time. With the prior years, it was only generalized discussion of when will [a chain] be back in the market,” Mr. Pollex said. “This year it was ‘how do we move this deal forward?’
“There were more specifics and more deals being talked about than I’ve seen in a long time. I had almost every one of my time slots booked before I left for Las Vegas. It was a jam-packed event,” Mr. Pollex said.
“Whatever the reasons for this, it’s exciting again. It’s fun to come to work. There’s a lot of good things to talk about and it’s just very exciting again,” he said.
Contact Jon Chavez at: firstname.lastname@example.org or 419-724-6128.