Retail sector builds momentum downtown
By Linda Lipp | Greater Fort Wayne Business Weekly
Retail vacancies in Fort Wayne continued to decline over the past year, even with the addition of new space to the market.
Downtown Fort Wayne in particular has a lot of momentum, with new spaces created in existing buildings and new construction bringing even more retail and restaurant space online, said Steve Zacher, president and managing broker of Zacher Co., which released its annual retail space study May 17.
“We readjusted the inventory number from 100,000 to 400,000 square feet downtown,” Zacher said. “We recalibrated the whole inventory.”
With the added inventory, the vacancy rate for the downtown area dropped from 47 percent in 2017 to 22.2 percent in 2018, the survey estimated. And with new retail and restaurant space expected to be part of other developments such as The Landing, Riverview, the new Ruoff building, North River and Electric Works, the increase from 100,000 to 400,000 square feet is “just a jumping off point” for future surveys, Zacher said. “There’s a bunch of things that are being talked about, but we don’t know if they will go or not. It would seem like with the accomplishments we’ve had, it’s almost just the beginning, if all this comes to fruition.”
If you build it
For years, complaints about the lack of retail options downtown have been answered with the real estate truism that the businesses would follow the people. To an extent, with the new residential offerings now available downtown, that is happening.
But downtown is also bolstering its reputation as a tourist attraction and is becoming a magnet for a larger regional market, with prestigious restaurants such as the just-opened Ruth’s Chris Steak House. And that likely would not have happened without the office, retail and residential growth that came first.
“If five years ago, Ruth’s Chris decided to come to Fort Wayne, I don’t know that they would have come downtown,” Zacher said.
In general, Fort Wayne has scored a lot of new restaurants in the last year, Zacher added. “There’s a ton of restaurants, big national chains, local restaurants. I mean it’s a lot.”
Vacancy rates dropped in every quadrant of the city except the northwest, which saw no change year over year. The citywide vacancy rate decreased from 12.9 percent to 11.1 percent, with a net of 324,000 square feet of space absorbed since the spring 2017 survey. That is the lowest rate since Zacher began tracking market statistics 10 years ago. At that time, at the beginning of the impact of the Great Recession in 2009, the overall vacancy rate was 16.4 percent. It rose to a high of 19.5 percent in 2011 before beginning to decline, with a few hiccups along the way.
Big boxes repurposed
Also at their lowest since Zacher began studying the market are the number of vacant big-box stores — spaces of 20,000 square feet or more. There are nine spaces in that category now, with a total square footage of 372,000 square feet. In 2011-2012, there were 18 empty big boxes, totaling nearing 1 million square feet of space.
“This is the fewest number of big-box spaces and the smallest total square footage since we began tracking big-box vacancy,” the report noted.
Many of the once-empty spaces that are back in use have been converted to public storage or warehouse space. It may not be the highest use for a property, “but it’s better than them being vacant,” Zacher said.
Among the spaces vacant the longest are the oddly configured former Marsh store on Maplecrest Road, which closed in 2006, and the Northcrest Holiday 6 theater, which has been empty since 2005. More recent vacancies include the HH Gregg store on Parnell Avenue, which has been closed not quite a year, OFD Total Home, which closed at Pine Valley and consolidated operations at its Ossian store late last year, and the Coventry 13 theaters, which shut down at the beginning of February.
The count of big-box vacancies does not include, however, the Carson’s store at Glenbrook Square, the Toys ‘R’ Us store at Glenbrook Commons and the Babies ‘R’ Us store on Coldwater Road. All three are in the middle of liquidation sales, but they aren’t yet – officially – vacant spaces.
Of those, the Carson’s store will be the hardest to fill, Zacher said. At 122,000 square feet, it is the largest, more than double the size of the other two, and it is on two levels. It is also on the backside of the mall, invisible to traffic passing by on busy Coliseum Boulevard. “The retail fundamentals just aren’t very good.”
Winners and losers
Glenbrook Square has scored some wins, however. A new strip center is being built on the site of the former Quaker Steak restaurant, which was demolished. A new Chick-fil-A is being built on Coliseum Boulevard frontage that is part of the Sears property, and a P.F. Chang restaurant is going into the former Abercrombie & Fitch space inside the mall, near Barnes & Noble.
On the northeast side, the Dupont Road corridor, east of Interstate 69, is expected to get two new major retailers, a Meijer store and a Kroger. Both have purchased ground, but neither as yet has announced when a new store will be built.
On the southwest of the city, Kelley Automotive will create a new auto mall on property currently owned by Menard’s. The $60 million project will include improvements to the entrance there and to a couple of Menard’s stores as well as the new dealer buildings.
“That land sat there for 15 years,” Zacher said. “Menard’s was fine to hold it for 15 years. I think that they always felt like some big user would come along.”
In terms of lease rates, there’s a big division between the haves and have nots. Lease rates are going up in the best locations.
“They are commanding more rent, partly because the land costs more and construction costs are going up, and that’s where the retailers want to be,” Zacher said. “In the secondary locations, the rents are going down and in some cases, you just have to demolish the space and start over.”
Data on rental rates at Glenbrook Square Mall, which is owned by General Growth Properties, and Jefferson Pointe, which was recently repurchased by its developer, Red Development, were not available.