A year ago, local commercial real estate agents and developers noted a resurgence in retail expansion in the Toledo area that hadn’t been seen since 2007.
Since then, that resurgence has gained even more momentum. While not quite a full-blown retail boom, it appears vacant store space is being gobbled up or redeveloped to the point where new or existing retailers have begun to pursue space that has sat idle five years or longer.
“Retail activity as a whole is greatly improved,” said Kurt Pollex, a commercial real estate agent with the Reichle Klein Group in Toledo.
A lot of that is because empty big-box stores are being filled, Mr. Pollex said, but smaller strip-mall vacancies are also decreasing.
In its recently completed midyear report on retail activity, Reichle Klein found that the metro area’s vacancy rate for retail space fell to 13.3 percent at the end of June from 14.2 percent at the end of 2012. The report does not include stand-alone restaurants, Westfield Franklin Park mall, Levis Commons mall, or the Shops at Fallen Timbers mall.
Overall lease rates sought by landlords have come down slightly to $7.78 a square foot from $8.19 a square foot at the end of 2012.
But Mr. Pollex said that drop is offset by the fact that fewer landlords are offering prospective tenants months of free rent or rent discounts, money for building improvements, or flexibility on leasing rates or lease lengths.
“Rents are firming up from two or three years ago. [Landlords] are getting a couple of bucks more per square foot and they’re not giving as much on tenant improvements,” said Germano Bressan, a commercial real estate agent with Signature Associates’ Toledo office. “The tenants still want that cheap rent, but they’re not finding it.”
According to Reichle Klein, new construction remains strong at just over 241,000 square feet of new space under construction in the first six months of 2013.
Part of that new space is an 86,000-square-foot Kroger store on Conant Street at Dussel Road in Maumee that isn’t finished yet, and it also includes a 90,000-square-foot Art Van furniture store in Springfield Township that opened recently.
“But if we look at where the activity is happening, it’s throughout the marketplace, although less in the [central business district],” Mr. Pollex said.
New construction includes an 18,000-square-foot Aldi supermarket on Alexis Road in front of Meijer, a CVS store on Monroe Street at Douglas, a Starbucks and Verizon store on State Rt. 20 near the Holiday Inn French Quarter hotel, Dollar General stores at Lagrange Street and Central Avenue and at Monroe and Auburn Avenue.
But commercial real estate experts said many other deals to take space also have been signed.
Dollar Tree has leased the vacant Rite Aid store on Monroe at Sylvania Avenue. Family Dollar has four new area sites under contract where it plans to put stores, and O’Reilly Auto Parts has obtained two sites, on Navarre Avenue in Oregon and on Central Avenue in Sylvania Township.
Harbor Freight Tools put a second store in the former Jo-Ann Fabrics store in the Miracle Mile Shopping Center on Jackman Road.
“And these are all just within the last six to eight months,” Mr. Pollex said.
Several other retailers, including sit-down restaurants or quick-serve restaurants, are expected to acquire new space by year’s end, including Quaker Steak & Lube, Pot Belly, Tim Horton’s, and Starbucks, Mr. Pollex said. Also, Art Van will add two more Pure Sleep stores, Camping World is putting an RV dealership in Rossford, and Kroger will begin building a new Kroger Marketplace store on Airport Highway at Holloway Road.
Even Costco is contemplating a second location, showing preliminary interest in a site at the southeast corner of Dixie Highway and Eckel Junction Road in Perrysburg.
Pete Shawaker, a commercial Realtor with Reichle Klein, said that the best thing about the revival of retail activity is that that every new deal lessens the pool of available space and shores up leasing rates.
For example, a week ago Reichle Klein helped fitness club operator Planet Fitness acquire the former Farmer Jack/Food Basics store at 2630 W. Laskey Rd. for $1.15 million. Planet Fitness will occupy most of the 58,000-square-foot store, which had been vacant since 2005, and other retailers are interested in occupying the remaining space.
“The point is, the dust has now settled on that property,” Mr. Shawaker said. “58,000 square feet is now settled, off the market, and it stabilizes the whole market. It means the next person that comes in has fewer choices and that Farmer Jack store will become the most comparable sale.
“The next buyer is going to have to pay higher for the next property available. People like to follow the first guy in, and the followers drive the [lease and sale] prices up.”
Steve Serchuk, a retail expert with Signature Associates in Toledo, said a key development since 2012 is that several big boxes vacant since 2007 or longer have been acquired or torn down.
“You have the Kmart on Central Avenue torn down by CarMax, and you have two vacant theaters ripped down,” Mr. Serchuk said. “All the theater sites are now gone with the exception of the Franklin Park cinemas, and their new owner plans to tear them down.”
Devonshire REIT recently bought the former theaters and the surrounding Shops at Franklin Place on Monroe Street. It plans to refurbish the space and build a retail strip center where the theaters are located. It says it has letters of intent from four retailers, including one that wants to occupy the former Media Play store in time for the holiday sales season.
Commercial real estate agents say that retailer, which is new to the Toledo market, is a clothing retailer that carries name brand items at discount prices. The deal is close to being finalized.
Six former Farmer Jack stores in town are either in use (one by a church and two by grocery operators), sold (to Planet Fitness), or scheduled to be torn down (Starlite Plaza by ProMedica and Orchard Centre by Kroger), Mr. Serchuk said.
“We’ve eliminated all the excess inventory and now, with no speculative development, it means limited choices,” Mr. Serchuk said. And locations that previously had a hard time getting noticed are now getting serious attention.
The 28,000-square-foot former Circuit City store at 6645 Airport Hwy., which closed in 2009, previously drew interest only from seasonal retailers like Halloween merchandisers.
But Rob Armstrong, vice president of Bennett Enterprises Inc., which owns the site, said interest has “significantly increased” in the last 18 months, with inquiries intensifying since July.
Mr. Armstrong said national retailers are “realizing how much [furniture dealer] Art Van’s presence in the Spring Meadows market will move the needle” with customer traffic.
Before this summer, two developers each had six-month purchase options on the Circuit City property but neither could persuade enough tenants to commit to a redevelopment of the site.
But Mr. Armstrong said since July “we have had serious negotiations with three separate national tenants for the vacant building.” One deal is in the “likely” stage, and smaller retailers have asked Bennett about building 3,500 square feet on a smaller lot in front of the vacant store, he added.
Another key development this year is emergence of smaller retailers, including mom-and-pop entrepreneurs, looking for vacant space to start or expand a business, experts said.
“The mom and pops are getting back into it. You can tell that some people have retired and want to start their own business,” said Eric Hutchins, vice president of leasing for Devonshire REIT of Whitehouse.
Mom and pop entrepreneurs Mark and Nikki Meyers are opening a new car wash on Heatherdowns Boulevard near Key Street on Saturday.
The couple had wanted to open their Meyers Auto Wash several years ago, but the recession made it hard for them to get financing. “It was very hard to get [a Small Business Administration] loan,” Mrs. Meyers said.
But the couple finally got their loan 18 months ago. Some family and friends thought they were taking a huge risk to open a new business on the heels of the recession.
But Mrs. Meyers said the couple believes their timing is good, and that their concept — a car wash with a Key West, Fla., theme — will win over local customers.
“I think we are cautious but we are confident. And we’ve educated ourselves enough to think this is a healthy move for ourselves and our family,” she said.
Mr. Bressan, of Signature Associates, said mom and pop entrepreneurs have been so active of late that smaller retail space of 2,000 square feet or less, which was plentiful a few years ago, is becoming scarce.
“It’s really odd because when the markets crashed we had a lot of vacancies. But over the last three or four years it’s been slowly coming back. Now, you look around and there’s nothing left,” Mr. Bressan said.
“The mom and pops, they’re getting braver. They’re not so much worried about the economy anymore,” he said. “I’m getting a lot of people calling looking for restaurant sites and they can’t find them. That’s the first time that's happened in a long time.”
Ken Hicks, Jr., head of Diverse Development of Holland, specializes in smaller strip center projects and said over the past year his company has broken ground on three small projects in northwest Ohio that were nearly all pre-leased.
“In the past year we’ve broken ground on 26,000 square feet of retail space and we’re hoping to really double that over the next 12 to 18 months,” Mr. Hicks said.
“As always, it comes down to location, but what we’re starting to see is the lending loosening up. The franchisees and the mom and pops are able to do more projects,” he said.
“I definitely feel a change. I think it could be much better, but obviously it’s much better than it was two or three years ago,” he added.
Contact Jon Chavez at: firstname.lastname@example.org or 419-724-6128.