- The Washington Times - Saturday, July 4, 2009

BISMARCK, N.D.

Not long ago, hundreds of anxious shoppers watched as city officials used power saws to cut 2-by-4s during Home Depot Inc.’s ribbon-cutting ceremony for its 102,700-square-foot building center in Bismarck. Less than three years later, the home improvement retailer shuttered the underperforming store, leaving a big orange empty eyesore on the outskirts of town.

The building, sitting derelict and silent on acres of asphalt, is listed for sale at $10.5 million. But there’s been little interest in the warehouselike building that occupies a lot more than the size of several football fields.

For potential tenants “it’s a hard pitch because for most uses it seems to be a bit of a tough fit,” said Brian Ritter, business development director of the Bismarck-Mandan Development Association.

As the recession takes its toll on big-box retailers, more communities across the country are having to confront not just the eyesore of giant empty stores, but also the loss of jobs and tax revenue that follow.

Many are trying to find creative uses for those near-windowless monoliths. In Minnesota, one became a Spam Museum. In Texas, an indoor go-cart track. In Illinois, a church moved into an empty Wal-Mart. The new tenants, however, often generate less revenue for local governments.

And with the recent spate of retailer bankruptcies and store closures, including Circuit City and Linens ‘N Things, more abandoned buildings will be added to a struggling commercial real estate market. There are already hundreds of empty “ghostboxes” across the country.

“There is not a landfill on Earth able to handle all the big boxes that we have sitting empty,” says Julia Christensen, author of the book “Big Box Reuse,” who has been studying the trend since 2002.

Some have been transformed into museums, community centers, hospitals or schools. Future tenants, however, can be restricted by the former retail chain.

“Often, they sign leases that prohibit competitors from moving in there, so they’re willing to pay on an empty building for a long time,” said Ms. Christensen, also a visiting professor at Oberlin College in Ohio.

The International Council of Shopping Centers said 6,913 retail stores - of all types - announced closures last year, compared with 4,603 in 2007.

Excess Space Retail Services Inc. of Lake Success, N.Y., specializes in real estate disposition and lease restructuring for retailers, including Home Depot, Wal-Mart, JC Penny and Kmart. The company has seen a more than 30 percent jump in the number of empty retail locations in the past year.

“We are handing in excess of 2,000 locations for some 50-odd retailers, said Michael Burden, a principal with Excess Space Retail. “The square footage is in the tens of millions.”

Home Depot, for example, closed 15 underperforming stores last year, and 41 of its smaller home improvement brands, including Expo Design Centers and YardBIRDS.

“The goal is to sell or lease the property as quickly as possible,” said Ron DeFeo, a spokesman for the Atlanta-based Home Depot. “The last thing we want is to see an empty store in a community - it’s a difficult enough decision to close a store in the community.”

In Frankfort, Ky., an empty Home Depot is adjacent to a sign welcoming visitors to the city.

Focusing on the positive, Phil Kerrick, economic development director for the city and Franklin County, said, “It’s a great building, in good shape and in a good location.”

Frankfort, Kentucky’s capital city, has dealt with vacant big-box space before, when Lowe’s Cos. moved into a bigger box in town. The vacated building was converted to a state office building.

In Round Rock, Texas, a former Wal-Mart was converted into a go-cart track for a time.

City Manager Jim Nuse said while the indoor racetrack was better than having the building sit vacant, it was far from an ideal use of the space.

The track was open for about two years until the building’s owners renovated the space to house several businesses, including a health club, restaurant and gourmet market.

Owners of the building gave it a new facade and landscaping to make it look less boxy in order to attract new tenants, all at no cost to the city.

“We were lucky,” Mr. Nuse said. “It was a less-than-attractive space for a while but it turned out to be really nice, though it took several years for that to happen.”

Hormel Foods Corp., maker of the famous canned luncheon meat, opened the Spam Museum in Austin, Minn., in an old Kmart building that once had been a Sears store.

Sandy Forstner, executive director of the Austin Area Chamber of Commerce, said the Spam Museum, which opened in 2002, has been more valuable to the southeastern Minnesota community than the previous retailers, both in terms of property tax revenue and the number of visitors it draws to the area.

“The property has been significantly improved,” Mr. Forstner said. “Hormel has spent millions of dollars redeveloping the property.”

The 16,500-square-foot building also houses the headquarters for Hormel and offices for a hospital, he said.

Mr. Forstner said the Spam Museum is one of the biggest destinations in the state, and has brought tourism dollars to the town of 23,000 people near the Iowa border.

“It’s always a problem for a community when a business leaves a building,” he said. “The bigger the business, the bigger the facility and the bigger the problem.”

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