Developers Forced To Pay For Their Empty Boxes
By Al Norman
At any point in time, some of the biggest names in American retailing have left hundreds of empty big box stores littering our roadways. These are stores that have been abandoned by their owners---often to seek larger digs across the street or down the lane. But cities and towns are beginning to more aggressively fight back.
Wal-Mart is the King of Ghost Stores. It has its own realty company--not just to locate new stores---but to dispose of the "old" ones they have discarded. Wal-Mart Realty today is trying to unload 197 dead stores. During the 1990s, Wal-Mart was carrying as many as 350 "dark stores" on their inventory, which caught the eye of Wall Street analysts. Since then, the company has stepped up efforts to shed these empty pounds from the corporate body.
For the past decade, Texas has been the all-time leader in Wal-Mart's "ghost box" race, with 20 dead Wal-Marts on the market. Illinois comes in at second with 15 empty stores, Georgia third with 13, Tennessee fourth with 11, with Oklahoma and North Carolina tied for fifth place with 10 dead stores each.
These stores can be huge castoffs, often larger than 100,000 square feet---more than two times the size of a football field. Counting buildings plus land, Wal-Mart has more than 1,000 properties on the market. The retailer has stepped up its marketing staff to get rid of what they call "dark stores." They also hire regional real estate firms to sell their properties. Carrying all these dead stores can be a drain on the company's capital, and Wal-Mart has gotten plenty of bad press because of its habit of arriving in communities with its bags already packed.
In the past month, Disney and Home Depot announced a series of store closings, and Linen 'n Things declared in early May that it had filed for protection under Chap. 11 in the US Bankruptcy Court for the District of Delaware. Its financial restructuring plans included closing 120 underperforming stores. The threat of hundreds of these 'ghost boxes' has begun to scare many communities into action.
This week, the Milwaukee Journal Sentinel reports that the suburb of Wauwatosa, Wisconsin, which has a population of roughly 45,000 people, has become the object of increasing attention because of its zoning ordinance which charges developers a fee to tear down their empty stores. Wauwatosa's big-box ordinance, which was adopted three years ago, requires developers who own buildings 50,000 square feet and larger, to set aside 20 cents per square foot in the city's land conservation fund, for use to raze the building if it sits empty for more than a year.
The bright blue Lowe's store on West Burleigh Street in Wauwatosa, for example, was required to deposit $28,000 into the conservation fund---but this is just a fraction of the full cost of tearing down and restoring such a huge site when it goes dark--which it will. The Journal reports that other communities are looking to imitate the Wauwatosa "razing fee." "It's a policy we're going to have to discuss," the director of community development for the Village of Menomonee Falls, Wisconsin said. Menomonee Falls had a Wal-Mart discount store shut down---but they were able to fill it with a J.C. Penney store. "The market took care of it" in that case, the official told the newspaper. "But that's something we might not leave to chance in the future."
When Wauwatosa passed its ordinance, developers were critical of the plan. But now the American Planning Association has cited the city for its model approach in protecting the taxpayers from a costly demolition expense. "This is exactly the climate we were anticipating when we adopted this," Wauwatosa's Community Development Director told the Journal. In Glendale, Wisconsin, the took a somewhat different approach. Any retail space larger than 50,000 square feet left empty for more than a year is classified as abandoned. In Saukville, Wisconsin, the community requires Wal-Mart to come up with a plan for its "old" building if their proposal to build a new supercenter is approved.
As more ghost boxes appear, more communities are groping for ways to make the company pay--not taxpayer. In some limited cases Wal-Mart has even given its stores away to the town to avoid continuing to pay the taxes and overhead costs of the empty building. States like Wisconsin have good reason to fear the impact of "ghost boxes." Wal-Mart alone has 7 dark stores in the Wisconsin communities of Berlin, Black River Falls, Mukwonago, Platteville, Racine, Stevens Points, and West Allis. The Racine store and Stevens Point are 115,823 and 119,481 square feet respectively. Such stores are not easy to recycle. In total, Wal-Mart today has 556,708 square feet. of dead stores in Wisconsin. In 2006, that number was 644,495 s.f. The empty Wal-Mart stores in Mukwonago, and West Allis have been on the market for at least four years. Two of the Linen 'n Things store closings were in Milwaukee and Racine, Wisconsin, and 3 of the Home Depot stores shut down were in Beaver Dam, Fond du Lac, and Miwaukee.
Communities are taking a look at other options besides demolition fees, such as prohibiting a retailer's lease from blocking a new tenant who is a competitor. This was a standard clause in Wal-Mart's lease deals during the 1990s. But 'razing fees' are a legal way for taxpayers to protect themselves from the ghost boxe that turn into vandalized eyesores.
When Wal-Mart cuts the ribbon on a new store, and passes out those large, foam board checks to local civic groups, very few people are thinking about the day when that store will be silent and dead. But that day is not far off, and is just another one of the hidden costs of doing business with companies that never really become neighbors. For a retailer that likes to talk 'green,' Wal-Mart is leaving a lot of black asphalt in its wake.
Al Norman is the founder of Sprawl-Busters, and has helped communities fight big box stores since 1993.