There’s more than one redevelopment option for an empty big-box store, experts said on a recent ICSC Connect Virtual Series episode, Big Boxes to New Uses. One is dividing it up for junior tenants, as the pool of tenants that would want the whole space is shallow, especially post-COVID-19.

Dividing the space, though, has physical, economic and legal pitfalls that could make it an unprofitable option, as well, said CBRE Retail Services senior vice president Joseph Parrott. Among the physical considerations: How many tenants are going to require loading? Adding a new loading dock is very expensive, so find users that can share or don’t need loading docks, Parrott advised. The depth of the building should not exceed 150 percent of the frontage of each tenant, he said. “If you’ve got a box that’s only 200 feet deep then it’s pretty easy to accommodate tenants as small as 25,000 square feet, but if you’re up to 250-foot depths, then anything under 40,000 will be a challenge.”

One solution for deep spaces is removing the front portion of the building, Parrott said. “The most costly part of the building is often the rear where you have the electric, plumbing and the loading, so taking off some of the front may be cheaper,” he said. “Knock off 25,000-30,000 square feet of the building and create 10,000-15,000 square feet of outlots, and you can create a smaller amount of space with the same NOI.”

It’s always cheapest to split a box by splitting along the column lines, he added. Entertainment and recreational users tend to need a wider column space than typical retailers. They also typically need 19-foot clear ceiling heights, compared with 16 feet for traditional retailers. “Take a look at what you’ve got and focus on the right tenants to fit your needs and your building,” Parrot advised. “These tenants will often ask to raise the roof,” he said. “It’s rarely cost effective.” A cheaper solution is to lower the floor. “Sometimes entertainment users don’t need that clear height in the entire space they just need it for certain attractions or areas of their space, so it may be possible to dig down the floor in that area to accommodate their needs.”

The search for tenants

When searching for new tenants, landlords should reconsider their strategies for using trade area data post-COVID-19, said Alan McKeon, president and CEO of data research firm Alexander Babbage. “Previously, we would look purely at demographics and drive times, etc.,” he said. “Now we need to start thinking about how people’s attitudes vary within the market, and we’re seeing that pre-shutdown, most people were traveling 1.2 miles [and] post-shutdown, they’re traveling less than 1.2 miles.” That comes down to the need for controlling their space and controlling their environment.

Landlords also could repurpose empty big boxes for residential use, said Ashon Nesbitt, chief programs officer for the nonprofit Florida Housing Coalition, which aims to add more affordable housing units throughout the state, including in empty shopping center space. “There’s always a need for housing,” he said. As the pandemic drives more retailers out of business, more landlords will have the opportunity to add residential units, he said. “We’ve seen a trend toward mixed-use for large regional malls with department stores closing. There might be more opportunities for this creative reimagining of the space.”

The full ICSC Connect Virtual Series episode is available here.