The recession has turned the East Valley into the king of empty storefronts.
The region has more vacant shops than the rest of the Valley, and the area also had the biggest gain of empty space in the last three months than any other part of the Valley.
The increasingly ghostly nature of strip centers is the work of overbuilding followed by a harsh correction when the recession hit. The Valley's overall vacancy rate is now 12.2 percent, with the Mesa/Chandler/Gilbert sector at 14.7 percent.
"I don't think that we have been in waters like these in any of the cycles that any of us have seen," said David Josker, an associate director at CB Richard Ellis. "It's been at least two decades."
The Valley has 305 empty big-box stores, defined as spaces with at least 10,000 square feet. That's up from 299 at the end of March, according to CB Richard Ellis. Vacancies have been on the rise for 13 quarters in a row.
He expects the wave of departures is coming to an end, with the recession shaking out weak stores and healthier tenants getting lower lease rates as landlords try to keep their plazas filled.
"We're definitely back on track," Josker said. "People have adjusted their lifestyles. Any one who is in business now and has been in business four or five years, they have figured out how to survive."
Stores were more likely to exit newer areas as foreclosures deprived them of customers, he said, while more established areas tended to do better. Shopping plazas will recover as residents return to empty homes, Josker said.
But the recession will have doomed some plazas. Some neighborhoods have more commercial space than the population will support, and cities generally encourage owners to convert those properties to other uses.
That problem is most acute in Mesa, where 16 percent of space sits idle. West Mesa was hit especially hard about five years ago, when Mesa Riverview opened and lured many stores from old shopping plazas to a snazzier center that offers good freeway access.
Shoppers shouldn't expect to see stores in those old buildings again, said Bill Jabjiniak, Mesa's economic development director.
"I think that there's a significant amount that has to be changed," he said. "It's not just the recession. We were seeing empty big boxes before that."
Some places will have non-traditional uses like churches, charter schools or medical malls in existing buildings. Others will have to be razed for another use.
Mesa is aiming to transform its westside properties with a $17 million line of credit for real estate projects, which will focus on job creation, Jabjiniak said. The city is about to begin marketing the funds, which Jabjiniak said could create a big opportunity for improvement.
That part of Mesa will also get a boost in 2016, when three new miles of light rail open along Main Street. Reviving these properties will usually involve more than just signing leases with the kinds of tenants that had been there in the past, he said.
"Just because retail was there previously doesn't mean it's going to succeed again," Jabjiniak said.
Chandler has made a big push to revitalize struggling strip malls, said Christine Mackay, the city's economic development director. It's worked with landlords to fill vacant stores by studying neighborhood demographics and going after stores that seem to be missing from the area, she said.
But the city also does studies to see if that kind of effort is worthwhile. If the city can't find demand for more stores, it encourages property owners to move away from retail. Mackay points to the Warner and Alma School roads intersection, which initially was developed with retail on four corners. That made sense before the city had freeways and a mall, she said, but not today. The city worked with a landowner on that corner to convert a former Smitty's grocery to the Chandler Preparatory Academy, whose 800 students help support stores at the other three corners.
Chandler's vacancy rate had been one of the Valley's lowest, at about 7 percent. But that's jumped to 13 percent partially because Bashas' shuttered four stores in its bankruptcy reorganization, Mackay said. The city is working on those sites, Mackay said, but they are proving to be some of the biggest challenges to reuse.
The city also offers matching grants for façade improvements to plazas in the northern end of Chandler. That's helped bring life to mostly vacant centers, Mackay said. The city has made shopping centers an economic development priority because their visibility makes them an asset - or a huge liability if they sit vacant.
"Once the center starts to go, it really acts almost as a cancer and moves in the neighborhood," Mackay said. "To keep our community sustainable, it's important for the city to keep an eye on those centers."
The East Valley has some bright spots, such as Gilbert's 10 percent vacancy rate. The Tempe/Ahwatukee Foothills market is 9.7 percent vacant, according to CB Richard Ellis.
The numbers may paint a bleaker picture than exists today, Josker said. Tenants are signing leases in plazas where there has been no interest for more than a year, and more transactions have been taking place in the last six months, he said. Those tenants are working behind the scenes now as they prepare to open.
"Deals are starting to get done," Josker said. "Centers are starting to fill back up."
tededitedit posted at 8:33 pm on Tue, Jul 13, 2010.
The recession hasn't helped, but there were stores and restaurants steadily going empty before it started. It's good to see city governments applying some "bandaids". I hope they've learned some lessons. To me, the most important task is to say no to further development and yes to re-development until new development is truly sustainable. If you don't then the new strip mall makes it hard for the old strip mall to ever recover. If the older strip mall survives it makes it harder for the new strip mall to succeed.
Slabside posted at 11:17 pm on Tue, Jul 13, 2010.
Don't blame it on the recession. Put the blame where it belongs... on the city managers that have no clue on what it takes to draw people to an area. Start with decent public transportation. Bring back Friday and Saturday night cruises weekly not just once a month. Entertainment in the form of night clubs not an expensive boondoggle of a art center that no one goes to. Run the lowlife and gangs out of Mesa.
azivan posted at 4:33 am on Wed, Jul 14, 2010.
Garin Groff, EVT reporter extraordinaire, is at it again. This brain-trust doesn't remember the EVT claiming the businesses closing down or leaving our state was because of SB1070 and the employer sanctions law going into effect? Unfortunately, Garin is closer to the truth than that sewage the EVT printed previously. Question is, will the EVT get Garin back in line with their editorial blame game when it comes to the reasons for all the empty buildings around town?
Truth is, that part of Mesa started its downhill slide about the time Tower Records closed up shop in the Poco Fiesta Mall along with a couple of movie theaters in that same general area. There were some decent stores & restaurants in that area around that time. And then that economic cancer known as Fiesta Village began to set the tone for that whole area along Southern and the City of Mesa did nothing to stop its spread. Who would want to open a respectable business next door to the Fiesta Village Mall? Over the past decade, that same train of thought caused the blight of Fiesta Village to spread about 2 miles in every direction. Lucky us!
Rich posted at 7:10 am on Wed, Jul 14, 2010.
Mesa subsidized Riverview. Tempe subsidized Tempe marketplace. So long as elected officials think that winning an election qualifies them to be developers the growth of redundant retail, even residential, space will be a rule. Retail creates nothing, it doesn't expand an economy, it merely moves shoppers around. All Riverview and Tempe Marketplace have done is to blight other areas, at public expense. Using public money to build private projects should be a crime, it is a corruption of government, and it rarely, if ever, produces dividends. People such as Mesa's Dave Richins, who champions this sort of activity is more to blame for the Fiesta Mall area than any property owner there. The problem is really corrupt government, and can be solved by changing government for pretty much the same reason one changes a diaper.
beefrits posted at 8:21 am on Fri, Jul 16, 2010.
The way I see it, as a former Mesa retail business owner, is that the city is so eager to create more revenue sources from sales tax that they allow retail space to become overbuilt and the market to become so over saturated that it becomes impossible for all the businesses to survive, even in good times. Throw in an economic slowdown and they start dropping like flies.
The market pie is only so big. Cutting it into more pieces only makes the pieces smaller and cannot increase to size of the pie..