What to do with empty suburban 'big box' stores

The faltering economy has forced anchors and big box stores to close in shopping centers across the suburbs, leaving massive voids in the retail landscape.

And analysts predict more bankruptcies and store closings to come.

While some developers and towns wait patiently for sales tax-producing tenants to take over the large, empty spaces, others are looking to alternative uses to plug the holes.

Those reuses range from a glow-in-the-dark mini golf course taking over a former Steve and Barry's store in Bloomingdale to a gymnastics academy relocating to a vacant South Barrington Circuit City store. Then there's a Kane County Circuit Clerk's office that set up shop in a former Montgomery Ward building in St. Charles and a church and school occupying an old Kmart.

Industry analysts say there are more than 220 empty anchor spaces totaling more than 10 million square feet of space in the Chicago area. Anchor spaces are typically larger than 20,000 square feet, said Joe Parrott, senior vice president of retail services for CB Richard Ellis in Bannockburn, which represents landlords. Big box stores are typically 50,000 square feet or larger.

In a recent report, Parrott said more than 40 percent of the anchor space made available in the first quarter of this year is attributable to six tenants: Circuit City, Linens 'n Things, Wickes Furniture, Expo Design and Steve and Barry's. Over the past year, 47 anchor spaces were filled, totaling 1.9 million square feet.

At that rate, it will take five years the fill all of the available anchor space already on the market, assuming no new vacancies are added.

"I think the worst is behind us," Parrott said, "but I think there will be additional bankruptcies moving forward."

The last time anchor retailers experienced a major fallout was in 2004, when Service Merchandise, Kids R Us, Kmart, Builders Square and Montgomery Ward closed all or some of their stores. At that time, there was 5.9 million square feet of retail space available in 102 chunks.

As more and more anchor chains and big-box retailers close stores due to poor sales or bankruptcy, some industry experts say creative reuses are key to filling empty shells again.

Leaving large spaces empty can cast a pall on surrounding retailers, forcing consumers to look elsewhere, said Rick Scardino, president of Affinity Real Estate in Arlington Heights.

"It used to be that you could fill one big box store with another one," Scardino said. "But that certainly is not the case in a down market ... If a church or a school can use it, they can bring in hundreds, if not thousands, of visitors. They may not bring in sales taxes, but traffic begets traffic."

That's the approach South Barrington took when the village welcomed the Midwest Elite Gymnastics Academy of Elgin to the former Circuit City store in the Arboretum shopping center. Just before Christmas, a fierce storm destroyed the academy's previous home - a dome structure on Mason Road in Elgin.

"Not everything can generate sales taxes, some places have to generate customers," South Barrington Village Administrator David Pierce said. "This is a good fit for the center because these types of places bring people who do generate sales taxes, just not directly at the site."

Mike Jaffe, president of Jaffe Companies, which developed the Arboretum, said the gym may not bring in sales tax itself, but it attracts young, active families with disposable incomes to the mall.

"We could afford to wait (for a retailer)," Jaffe said. "But why wait when something good is right there?"

Similarly, Wichita, Kan.-based Glowgolf will open a location in the former 40,000-square-foot Steve and Barry's store at Stratford Square Mall in Bloomingdale. The company uses mall space to sell and display its components, but most of the traffic is from players, Glowgolf Chief Operating Officer John Wright said. The indoor mini-golf course is illuminated by black lights. Wright said courses are also planned for Aurora, Joliet and Vernon Hills.

That kind of creative approach is needed to backfill the plethora of space on the market, said Scardino, of Affinity Real Estate.

"The market is telling us we don't need more," Scardino said. "We will see more prudent development, more demand-driven, adapted reuses of space."

Yet, such reuses are not always favorable to retail centers, said CB Richard Ellis' Parrott, who called such practices a "last resort."

"Alternative uses are not good for leasing the rest of the center," Parrott said. "It's better than leaving the space empty forever, but it sends the message that this was not succeeding as a retail location and we had to do something different. Retail is the best traffic-generator for a shopping center."

However, there are circumstances under which an alternate reuse could flourish, Parrot said, such as a free-standing store like the gymnasium or at a location with a number of successful anchors.

Some towns are opting to ride out the economic crisis.

In recent years, Vernon Hills has seen Wickes Furniture, Linens 'n Things, electronics stores Tweeter and Circuit City, as well as Home Depot's Expo Design Center, close. So far, none of the boxes have been filled. But a quick-fix is not the answer for the village.

"We are not sure what we'll see in the current boxes," Assistant Village Manager John Kalmar wrote in an e-mail. "We would like to see new retail use go back into the space, due to the fact that 50 percent of our revenue comes from sales tax. We do not receive any revenue from a non-sales tax use because the village does not have a property tax."

Kalmar noted Vernon Hills successfully repurposed a 191,000-square-foot SuperK store that closed in the summer of 2002, soon after its parent company, Kmart, filed for bankruptcy and off-loaded stores.

It was converted into a multi-tenant space and now houses Dick's Sporting Goods, Bed Bath and Beyond, DSW Shoes, Old Navy and JoAnn Fabrics.

An alternate use can be found in the village's Westfield Hawthorn mall. The village recently approved a Glowgolf course in the former Sam Goody store.

Like Vernon Hills, Carol Stream also forgoes property taxes, relying heavily on sales tax revenue. The village is trying to fill a Value City furniture store space with another retailer. Earlier this decade the village welcomed a religious institution into the old Big Kmart store on North Avenue.

Despite reservations from village leaders, Wheaton Christian Center spent almost $2 million to renovate the 120,000-square-foot store on North Avenue near Schmale Road.

But the village is not willing to make those accommodations this time.

"The land use in the comprehensive plan calls for commercial use," said Community Development Director Bob Glees. "We are being patient. With the market right now, we are not surprised that commercial spaces aren't moving. No one is building and stores are closing. But we know it will turn around."