Giant retail vacancies pile up across N.H.
The Walmart store in Hooksett moved across the street in August, reborn as a new “supercenter,” a building of some 150,000 square feet, leaving the older, smaller 75,000-square-foot building empty.
The empty Walmart in Hooksett is only the most recent addition to the growing roster of empty big-box stores. In fact, the sight of vacant large – sometimes very large – former retail outlets has become particularly more commonplace in the wake of the bankruptcy of retail chains like Circuit City, Linens ‘n’ Things and Tweeter.
While the loss of a major retailer is significant to former employees and the owner of a shopping center, the downstream effects of empty properties as large as hundreds of thousands of square feet can have an impact on surrounding businesses and communities as well.
“Big boxes are going dark because it’s a challenge to repurpose them,” said Dan Scanlon, an adviser with the Bedford-based real estate firm of Grubb Ellis| Coldstream Real Estate Advisors.
For instance, Scanlon speculated, the owner of the empty Walmart in Hooksett – Pennsylvania-based W.P. Realty — may eventually “have to cut it up” for smaller users.
Kathy Pricard, spokesperson for W.P. Realty, said she could not comment on whether there were people interested in the property, only saying, “We are actively marketing all our vacant properties.”
William Norton of Manchester-based Norton Asset Management said going the subdivision route won’t be easy. “The number one challenge is scale; these are huge. They could be designed to be rebuilt, but that’s costly, and most of these guys don’t do that.”
The problem is a perennial one, only made worse by the economy.
For instance, the former Shaw’s supermarket on Daniel Webster Highway in Merrimack has remained vacant for years. News reports say landlords are holding on to the property, but many of the other adjacent stores have moved away, leaving the plaza largely empty.
But the economy has made the situation far worse. Most recently, the Blockbuster video store chain said in September that it plans to close 960 stores across the country. Whether the pruning will affect its dozens of outlets in New Hampshire remains to be seen.
While the residential real estate market was severely anemic even before the bottom fell out of the economy a year ago, commercial real estate also has been facing its own difficulties as credit became severely constricted, compounded by loans with more favorable rates from years past coming due.
“No retail is growing,” said Norton. “None of them have capital and they have huge debt that is rolling. It’s not pretty.”
On the brighter side, some of the empty sites of former electronics retailer Circuit City have attracted some interest.
Kent White of CB Richard Ellis/New England’s Portsmouth office — the company that listed the Circuit City stores in Manchester, Nashua and Portsmouth — said the firm recently sold the Portsmouth location on Woodbury Avenue to OSJ of Portsmouth LLC.
“That property was on the market for about 10 months,” said White. “Just two years ago a property of that size on Woodbury Avenue would probably have sold within six months.”
The price was affected too. He said it was originally listed at $6.4 million. It sold for $3.5 million.
White said the property will become an Ocean State Job Lot discount store.
“It just shows what we’re seeing in the market,” he said. “The discounters are doing really well.”
He added the former Circuit City in Nashua was leased by Savers, another discounter.
Circuit City on Willow Street in Manchester was bought by abutter Quirk Autos.
There‘s another issue at play that has nothing to do with the economy, but with New Hampshire itself.
“The overall demographic is a challenge in New Hampshire,” Scanlon said. “Elsewhere, these boxes are getting subdivided and filled by non-traditional users, such as health clubs, medical offices, state offices and specialty grocers such as Trader Joe’s, Aldi’s and Tesco’s Fresh & Easy Market. We’re not seeing that here. We’ve pretty much maxed out on non-traditional uses here.”
NHBR contacted Trader Joe’s, asking if the specialty retail grocery chain had any interest in opening a site in New Hampshire. Alison Mochizuki, a Trader Joe’s spokeswoman, said “a New Hampshire location is not in our two-year plan.”
Another challenge to finding a new use for big-box stores is zoning, said Norton.
“Often these are in a commercial zone. If that doesn’t fit the new use, (the owner) would have to deal with that,” he said.
Surprisingly, municipal revenues are not affected as much as one would think when a big-box store empties, since most of the properties have an owner who continues to pay property taxes.
“That’s a misnomer. Property taxes are still paid, the light and the heat are paid,” said Scanlon. “It’s not a real bite to the town in terms of revenue.”
The new Hooksett Walmart could actually benefit the town more than the old store in terms of increased property taxes on the larger property and more jobs being created, he said.
While no one knows what the next year will bring in terms of the economy and investment property, Scanlon said he believes things will get a bit worse before they get better.
“In the next 12 to 18 months, what’s going to happen with retail investment property is we may see some hit to the market as loans are going to come due. Some owners will have issues with fewer tenants, therefore lower cash flow. And lenders are still scrutinizing their loans,” he said. “We don’t have some of the same problems as other parts of the country. There are always opportunities for investors looking to pick up this stuff on a discount market. But from an investor’s point of view, it’s not going to be as good as they think. From the lender’s and the owner’s point of view, it won’t be as bad.”
Cindy Kibbe can be reached at firstname.lastname@example.org.