Retail Centers Become Face of Market Shift

Fort Wright Plaza was fully leased when Tappan Properties Inc. bought it back in 2003, with Stein Mart at one end and a Thriftway grocery as its anchor.

Now the strip center sits 70 percent empty. And Walgreens, its largest remaining tenant, plans to leave for a new stand-alone location before year’s end.

“To make a long, miserable story short, we lost our shirt on this property,” said Charles “Chip” Tappan, president of Tappan Properties.

In just a few years, the center went from a sound investment to a mostly empty shell, one of dozens of aging retail centers around Greater Cincinnati struggling to survive.

Nearly every community has one, and a few are doing just fine. But more and more are facing the same trouble as Tappan, with anchor tenants closing stores or moving to newer locations. And that’s left a growing number of empty, hulking spaces across the Tri-State as investors and communities alike watch the retail landscape shift.

Troubled centers dot the Tri-State

“Cincinnati hasn’t had to face this before where a whole trade area gets abandoned,” said David Birdsall, chief development officer for Phillips Edison & Co., which specializes in reviving struggling retail centers.

But Greater Cincinnati is facing it now, and in some of its most established communities.

Fort Wright Plaza sits across from a tony new Fort Mitchell subdivision, and nearly 20 percent of the households within a 10-mile radius earn $100,000 or more.

Del-Fair Shopping Center in Delhi has nearly 300,000 homes within 10 miles, with nearly 60 percent of them owner-occupied. And Shoppers Haven in Loveland has more than 40 percent of its households earning $100,000 or more within 10 miles.

But even Shoppers Haven has huge empty spaces where Hader Hardware and Jo-Ann Fabrics used to be. And an empty storefront that once housed a drycleaner at Del-Fair was filled with debris one recent afternoon – snow cone wrappers scattered on the floor, chair cushions piled high and a wall covering peeling away from crumbling drywall.

Time to start over

Still, neither compares to Fort Wright Plaza, where Tappan recently signed a temporary deal with 123 Wellness Inc., a discount exercise equipment retailer, to fill some of the empty Thriftway space. The storefront has limited hours and a lease that runs through mid-March.

“I figured they could pay the heat bill,” Tappan said.

It’s come to that. Tappan, in fact, faced foreclosure on Fort Wright Plaza late last year when his loan was coming due. The center was sold to a new partnership led by developer Bill Butler, an old friend of Tappan’s. Now Tappan is a minority owner, and his company continues to manage the property for Butler and the rest of the ownership group.

Once Walgreens leaves in a few months, a co-tenancy clause gives the Dollar Tree store there six months to decide whether to pull out of its space, Tappan said. If that happens, it would leave the center’s 110,000-square-feet main building completely empty, with just a Blockbuster, a Porter Paints and a U.S. Bank branch still operating on the property.

“Bill and I are trying to figure out what to do with it,” Tappan said of the plaza. “We can’t do much of anything until Walgreens moves down the road. We’re looking for other alternatives to redevelop that property.”

That will be the key for aging strip centers across the Tri-State and the nation, said Stan Eichelbaum, president of Retail Developments Inc., a retail consulting firm.

“The remerchandising needs to be redefined as re-using,” he said. “We’re involved in several projects where we’re acclimating the retail to the actual lifestyle needs of the community.

“In many neighborhoods, a college extension or even a church makes more sense to draw masses to (other tenants) such as restaurants or a drug store.”

And while the older centers might lack the curb appeal of new retail developments in emerging suburbs, they can actually be a better investment for people who are willing to get back into the commercial real estate market, said Joel Dumes, vice president of investments at Marcus & Millichap Real Estate Investment Services downtown.

Low rents getting lower still

Rents already are so low at centers such as Del-Fair that they can’t get much lower, said Dumes, whose firm is the listing agent for the Delhi center.

Source: Business Courier

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