As consumer shopping preferences have changed over the years, once thriving big box retail stores have become abandoned storefronts. These buildings, typically 100,000-150,000 square feet, are difficult to replace with new retail tenants. That leaves redevelopment as the best option to revitalize these sites. The large acreage available on these sites gives communities the flexibility to transform them into something new, including storage units, medical facilities, light industrial, and fitness studios.
Today we chat with Brian Lenahan, Senior Vice President at Premier Development Partners, about the retail redevelopment process as well as Premier’s redevelopment projects in Northeast Ohio.
The conversation below has been edited for length and clarity.
What all goes into redeveloping these former big box retail properties?
The driver for many of these projects is location, location, location. In a way, it’s already done for us, as retailers strategically choose these locations in the first place due to local demographics and highway access. With redevelopment, we are leveraging that expertise, taking an empty building, and repositioning it to honor the current market. Retail is changing and as it evolves, replacement uses like light industrial, storage, and medical come in.
As a developer, when we approach a redevelopment project we first identify where these new users are coming from and what their expectations for a new space would be. Then we work do identify how we can attract these users to that location with strong local demographics and highway access. If you have the right location, there is a market to support these types of projects.
What redevelopment projects has Premier recently handled?
Premier has completed a redevelopment project in Eastlake and is currently working on another project in Middleburg Heights. The Eastlake project transformed a former Walmart into a light industrial space and allowed the user to move from a multi-story building to a single-story building with ample parking. This light industrial company was attracted to this site due to the opportunity to create a more efficient workflow with a single-story building at a reasonable cost.
The Middleburg Heights project is still in progress, and for this project a medical group will occupy the majority of a former Kmart store. The medical group had been looking for a property in that vicinity for several years, and this property is an excellent fit due to the excellent highway access. Additionally, it’s very accessible for the community. You pull in like you’re going to the store, walk in, and walk out. Simple, easy. It’s perfect for an outpatient facility.
Despite the end users having different requirements, in both these cases we were able to take an existing box and build them out to make it work for their unique needs.
What are some of the challenges a company might encounter if they choose to redevelop an existing location, rather than building new? And then on the flip side, what are some of the benefits?
The most significant challenge is usually the condition of the building. These former big box retail locations are often 30-40 years old, and they are not always well maintained. Even with due diligence, there are unexpected issues that pop up. Asbestos is common, a roof needing updated – these are the types of problems that you can inherit. You try to anticipate the potential issues, but in the end, you need to work with what you got. You have to make sure that even with a dated building it is in the best shape it can be in.
Another challenge that may arise is zoning issues. If a zoning change is required, that means working with the city. Zoning laws can vary from city to city, so you need to be diligent when preparing your application.
The absolute biggest benefit for a company choosing to redevelop is cost. With construction costs skyrocketing and the material lead time increasing, it’s so much more cost effective and time effective to purchase an existing building, even if you’re planning to redo some of it. You know where the building is, you already have parking, there usually isn’t any road work that needs to be done. It saves a tremendous amount of time, energy, effort, and money. It’s a huge advantage. Huge.
Is it tricky for companies looking for real estate to imagine a new use for existing buildings?
Often times yes, but now you’re starting to see more and more of it. As market demands change and there’s fewer properties available, developers are reimagining these existing spaces into alternative uses. Companies are starting to appreciate that and realize that they don’t necessarily need to be in an industrial park. With ample parking and excellent highway access, many of these former big box stores are in ideal locations for today’s companies.
Do the local communities typically embrace redevelopment of these buildings or are they more resistant to change?
The community has been excited for both of the retail redevelop projects that Premier has done. Both Eastlake and Middleburg Heights had dead retail stores that sat for long periods of time, despite these two cities being completely different markets. Eastlake is a fairly quiet market while Middleburg Heights is a thriving market. Both cities wanted to backfill these 100,000+ SF properties.
Further, both of these redevelopment projects were job creators. In Middleburg Heights, they went from Kmart jobs to medical ones. In Eastlake, they went from Walmart workers to light industrial workers. The result is an increase both to the number of well-paying jobs available for the local community and an increase in tax revenues for the city. So, there was an increase in pay, an increase in employment, and the value of those buildings increased, potentially leading to a property tax increase. That is what they call a win-win-win.
Brian Lenahan joined Premier Development Partners in February of 2017, bringing 20 years of experience in the commercial real estate industry. Brian began his career as an attorney, both in public and private practice. His law practice eventually led him to commercial real estate where Brian has excelled as a senior advisor to large national and regional clients in industrial commercial real estate. Brian’s expertise and transaction history include corporate portfolio advisory services, tenant representation, landlord representation, investment services, and receiverships. His knowledge in making strategic contacts and growing businesses will be a strong asset for identifying new opportunities for Premier Development. Brian is also a member of the Ohio Bar, and is a frequent contributor and lecturer in real estate and law forums.