Empty big-box retail stores a growing problem (or opportunity) for suburban Detroit

For clues to what may happen to all those empty big-box stores and ailing shopping centers in suburban Detroit where people once swarmed, look to the shopping district around Westland's namesake mall.

When retailers such as Value City, Circuit City, Service Merchandise and Macy's at Westland Shopping Center closed, they left behind large and vacant store buildings, a type of retail space that has gotten challenging to fill amid the explosive growth of online shopping and consumers' changing shopping habits.

A few of these shuttered stores were eventually refilled with new stores. Others were transformed to house businesses that aren't retail. Some still sit vacant, and one big box was torn down.

While Westland has seen a particular abundance of large store closings, retail and development, experts say that suburbs across the region have become over-saturated with stores as more shopping moves online and traditional retailers downsize.

There is general agreement that southeast Michigan now has more empty big-box and midsize box stores than retail tenants to fill the space.

"There's going to continue to be closures, without a doubt, because we're over-stored," said Frank Monaghan, president of Monaghan & Company, a commercial retail brokerage. "There are a lot of areas in the Detroit area where I don't see retail occupying these buildings ever again."

Struggling retailers like Kmart, Sears and JC Penney — all known for big stores — have been closing dozens or even hundreds of locations a year. And there is no indication this will stop. That means more Michigan cities will be dealing with empty retail boxes and their negative effects on nearby shopping centers.

"It's not only in Michigan, it's nationwide," said Ron Goldstone, senior vice president at NAI Farbman, the Southfield-based real estate firm.

Eastland in distress

The big empty store problem is turning critical for a few communities such as Harper Woods, where visibly struggling Eastland Center mall has lost two former anchor stores — Macy's and Sears — and is set to lose another in February when Target closes. The mall also is a neighbor to a vacant Circuit City that has languished for years.

"The whole big-box concept is not working, as far as it pertains to malls," Harper Woods City Manager Randy Skotarczyk said.

The proliferation of empty stores has compelled owners to be inventive when trying to refill them, chopping up properties into multiple smaller storefronts and going after nontraditional tenants, such as trampoline centers, swimming schools, self-storage, medical facilities and light industrial workshops.

"You have to get creative or you're going to have a lot of empty big boxes decaying in front of your eyes, and then basically being bulldozed," Goldstone said.

Harper Woods once considered relocating its City Hall into Eastland's empty Sears. But that idea was thwarted by selling restrictions in the mall's complex ownership structure that followed its default on commercial loans, according to Skotarczyk.

The latest Eastland proposal calls for converting the mall's empty four-story Macy's into self-storage units.

"There seems to be a need in the area for storage," Skotarczyk said, "but I don't think it's going to generate a lot of excitement for other stores to move to the mall."

Amid the proliferation of empty stores, retail rents across the region have been flat or somewhat below their levels of five or six years ago, according to broker Jim Stokas of Stokas Bieri Real Estate.

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"The deals that are getting approved now for retailers are almost perfect for them — that is how much availability there is," Stokas said.

Communities also often lose tax revenue after large stores convert to nontraditional uses, such as gyms or a nonprofit organization.

"When you look at retail and where it’s headed, and property taxes being one of the major funding sources for local governments, it is very concerning," said Steve Currie, executive director of the Michigan Association of Counties.

Too many boxes

Farbman group's Goldstone, which regularly brokers big-box property deals, estimates that one-third of empty stores in southeast Michigan could get reused in their current retail format. That has been happening to numerous old Kmarts that Kroger has bought, renovated and transformed into new grocery stores.

For the remaining two-thirds, he believes about 60% of them could see new life through nontraditional tenants, such as gyms or storage facilities.

Prospects aren't good for the leftovers. Some could become flea markets or bingo parlors, "or they may just sit there and eventually get torn down," Goldstone said.

To be sure, Internet shopping isn't about to replace all brick-and-mortar stores.

A recent report, titled "Debunking the Retail Apocalypse" by Nashville-based consulting firm IHL Group, found that companies are expected to open several thousand more stores this year than the 10,000-plus stores expected to close. Many of the new stores are dollar stores and groceries, and just 16 downtrodden retailers such as Radio Shack, Payless ShoeSource and Sears made up nearly half of all the anticipated closings.

"Brick and mortar is not going away, it's just reinventing itself," said Monaghan, the commercial retail broker.

Old buildings, new ideas

Newer businesses, such as Aqua-Tots swimming schools, often seek out empty store buildings. Opening an Aqua-Tots school can be expensive, as each location will need a 60,000- to 70,000-gallon enclosed, in-ground swimming pool to be built.

"With construction costs the way they are, it is definitely an economic advantage to take secondhand space," said Brian Tomina, who, with his family, owns six Aqua-Tots franchises in suburban Detroit, including one in Canton in a former Ace Hardware, one in Farmington Hills in a former Trader Joe's and another in a former Auburn Hills Applebee's.

Transforming a former store into a non-retail business can require a flexible mind-set on the part of local zoning boards and city officials, who may be inclined to reject or slow plans for a location that doesn't fit its traditional use.

"There are (businesses) to backfill the majority of these boxes, if you can get the use permit," Goldstone said. "There's at least 100, 150 opportunities in Michigan in the next 24 months where you could be smart and get them reoccupied."

A shopping destination for decades, Westland has seen many big-box stores close and empty out in recent years, most recently the Macy's in the mall. Perhaps out of necessity, the city has been at the forefront of creative big-box reuse.

A prime example happened in 2014, when Westland officials relocated City Hall. Where to? An empty Circuit City store on Warren Road.

"A new City Hall was going to cost us $15 million for 36,000 square feet," recalled Westland Mayor William Wild. "We purchased this building and we renovated it and modernized it for $10 million, and it is 63,000 square feet."

That same year, a portion of Westland's empty Value City department store also underwent big renovations.

Creative construction

Black and orange trampolines were installed over the showroom floor. A basketball court went up. And a "mosh pit" of foam blocks appeared, ready for youngsters to jump in. Welcome to AirTime Trampoline & Game Park.

Marwan Hachem, the trampoline park's general manager, said the old Value City building worked great for his business, which now draws 500 to 1,500 youths every Saturday, many between the ages of 8 and 12.

"For our type of business, the open big box and the height of the ceiling helps a lot," he said, adding that the city was quick to approve AirTime's zoning application. "We've been here three years and business is good. Better than having an empty place."

Westland's inventory of empty stores helped it land Michigan's first Crunch Fitness, a popular gym chain on the East and West coasts. Crunch opened in September inside a former 25,000-square-foot office furniture liquidation store that is across Warren Road from the mall.

Club co-owner Adam Hourani said he and his business partner plan to open at least three more Crunch gyms next year in metro Detroit. "A lot of the locations we're looking at are former furniture stores and a former Borders," he said.

Yet not every vacant big box in Westland has gotten a second life. The mall's Macy's, which closed in March, still awaits a buyer. And a former Service Merchandise store near the mall stood empty for about 15 years, never finding a taker. The city acquired the Service Merchandise and tore it down three years ago.

"It had been closed for so long that the prior owners had kind of stripped it of all its usable bones," said Wild, the city's mayor.

Strip malls under pressure

Some strip malls are also under pressure from store closures. Burlington Square Plaza in Taylor, across from Southland Center mall, is still anchored by Burlington Coat Factory but is coping with multiple storefront vacancies. There are signs for stores, such as Catherine's Plus Sizes, that long ago moved out.

"They closed just one by one. Everybody's leaving," said Sharon Weinstein, a manager at the Trainco Truck Driving Schools office in the shopping plaza.

Still, the shopping strip has been a good location for Trainco, Weinstein said, explaining how a back parking lot — now empty of any cars — is a great spot for learning how to back up tractor-trailers.

"I hope to stay here forever, but I know that they are hurting with all these empty stores," she said.

The plaza includes a large empty movie theater that closed about five years ago and became a target for intruding metal scrappers.

Messages left for the plaza's manager, Troy-based ProVisions, were not returned.

Dead mall's neighbors

The region's hardest-hit retail strips may be those surrounding now-dead Summit Place Mall in Waterford. However, they also showcase some of the more creative reuse concepts.

One plaza, Summit West, once contained an array of stores such as Office Max, Target, Dollar Castle and Sports Authority. Now it's down to one ordinary business, Joann's Tailoring, even though signs are still up for a nail salon and a Blimpie sub shop that closed more than a decade ago.

The plaza's other tenants are a charter school and a nonprofit thrift shop and food pantry called Oakland Hope.

"When the mall was open, this was kind of a happening place back in the '80s," said Oakland Hope worker Alan Horner.

Summit West is a neighbor to an empty big-box store that was a Sam's Club until February 2016. Next door to that is another shopping plaza, Summit North, which also lost its retail stores in the aftermath of Summit Place Mall's closure in 2009 and 2010.

Today it is home to Playtime Family Fun Center (formerly a Gander Mountain store), and an indoor athletic facilities space called Elite Sportsplex.

The Sportsplex took over an old Steve & Barry's clothing store, installing courts for basketball, volleyball, soccer and pickleball. It is presently expanding into an adjacent storefront, taking over an indoor space that had batting cages.

"A lot of schools don’t have enough space to host these soccer clubs' and volleyball clubs' practice anymore, so you have a lot of these empty buildings that are suitable for these needs," Sportsplex owner Roly Roldan said.

More Westland vacancies

Back in Westland, another shopping center across from the mall at 35500 Central City Parkway lost its Dick's Sporting Goods several years ago and is set to go completely dark in 2018, when its remaining tenant, Garden City Hospital, closes outpatient clinics that fill several storefronts.

The hospital plans to move the clinics to a nearby strip mall on Warren Road that the hospital recently purchased. That strip mall once housed a bridal shop, laser tag and other businesses that closed. Today it's down to one tenant: Malarkey's Irish Pub.

Al Mansour, who, with his son Clint, owns and manages the soon-to-empty shopping center, said they are scouting for new tenants.

"Whether it’s industrial, whether its storage, medical, we are not picky on who we want in there," he said. "Whoever is willing to pay rent, they're welcome to come."

Contact JC Reindl: 313-222-6631 or jcreindl@freepress.com. Follow him on Twitter @JCReindl.