Retailer "Right-Sizing" Creates Opportunities, Becomes a Best Practice

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Big box downsizing gives retailers new opportunities to find Class A space.

 

MonethaCobbWith many big box retailers downsizing, new opportunities have appeared for the retailers who are struggling to find Class A space as they expand into new markets.

Whether an expanding retailer is looking for space near a top-performing mall in a major metro market or in a rural town, new developments within the past five years has been hard to come by. The bankruptcies from 2009 to 2011 gave these retailers some relief by providing the opportunity to subdivide and backfill well-positioned units vacated during the time of heightened closings and dispositions. You may recall some of the major retailers who contributed Class-A space to the market, including Circuit City, Linens N Things, Borders, Blockbuster and Hollywood Video.

As these vacancies continue to be absorbed and development stays flat, we are seeing a new "right-sizing" trend surfacing. Industry-leading retailers who have survived the bankruptcies and economic downturn are implementing strategies that require less space to sell their goods or services. This trend of downsizing or "right-sizing," is now providing opportunities for expanding retailers to move into this "excess" space.

A great example of this trend is from retailer Five Below, a chain with merchandise marketed towards pre-teens and teens at the price of $1 to $5. Five Below entered the Atlanta market with seven new spaces, three of which were downsized Class A spaces belonging to other big box retailers.

Other retailers that have reconfigured space appropriately include: Perimeter market downsizing Office Depot; Woodstock market downsizing Old Navy; and Newnan market downsizing Old Navy. Additional retailers who are "right-sizing" their store sizes to improve profitability include Best Buy, Kmart, Sears, Office Depot and Staples.

With new retail development still relatively stagnant and retailers learning how to operate with less square footage, tenants and landlords are finding new ways to accommodate additional retailers and have spaces that create value for both.

When new development starts up again, expect more and more retailers to select spaces that reflect their new "right-size," which in-turn will continue to provide opportunities for new retail start-ups and spur more creative redevelopment. Unlike many trends, "right-sizing" will transform into a best practice.

 

 — Monetha Cobb is the senior director of Franklin Street Real Estate, specializing in retail tenant services throughout the metro-Atlanta market. She can be reached at Monetha.Cobb@fsfp.com 

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