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By Mac Juarez
ARIZONA DAILY STAR
July 27, 2003  

Several retail spots, many of them older and in the inner city, are getting versed in the three R's of staying competitive - redevelop, re-tenant or raze. At least 10 percent of the area's roughly 200 shopping centers and big-box stores have major vacancies, accounting for about 1 million square feet of empty shopping space. That's a small fraction of Tucson 's 22 million square feet of big-box and shopping center space. But vacant or largely vacant shopping centers can become a blight on the community, transforming the look of a neighborhood from vibrant to anemic.

Some recent successes are stemming the tide of vacancies. Home improvement giant Lowe's leased two empty buildings last week that previously housed Super Kmart stores. And a large East Side plaza has been hit with the redevelopment hammer, now that Home Depot has moved to new digs. For the centers that still have major vacancies, fixing up some is as simple as finding the right shops to attract shoppers. Others need extensive physical makeovers. And a few are so dated they should be demolished, real estate brokers and developers say.

The challenge: Shopping-center owners don't want to spend money on their properties until a major retailer commits to the space. A large anchor store, such as a supermarket or drugstore, draws both shoppers and smaller retailers and can make a shopping center a destination stop. "You are not going to see a major renovation to a shopping center until the anchor deal is done," said Craig Finfrock, a retail specialist with Commercial Retail Advisors.

Finding the right anchor

Property owners used to rely on supermarkets to anchor their centers. But consolidation and bankruptcies in the grocer ranks have thinned consumer choice and gutted some shopping centers. In Tucson , at least half a dozen large vacancies still remain from closures that include Garrett's IGA, Food 4 Less and Southwest Supermarkets.

Northgate, on the northeast corner of East Grant Road and North Alvernon Way , has been home to two grocers in the past 10 years - first ABCO, then Garrett's IGA. "We would like to replace what was there with another market," said retail specialist Bob Kivel, who is marketing the property for Oxford Realty Advisors. One likely - but controversial - candidate for centers like Northgate is Wal-Mart's new "Neighborhood Markets." Wal-Mart is scouting for Tucson locations for its markets, retail broker Finfrock said. They are between one-fourth and one-fifth the size of its superstores,

Five years ago, the retail behemoth introduced the down-sized stores - 42,000- to 55,000-square-foot - to penetrate urban markets with grocery sales. The fear, however, is that Wal-Mart could drive out other supermarkets, creating even more shopping center vacancies. Already, grocers elsewhere have been forced to drop prices to compete with Wal-Mart, which last year became the nation's largest grocer.

Not the perfect fit

Vacant space in a shopping center or stand-alone store often is too big, outdated or poorly located for today's retailers. A big box vacated by the likes of Kmart or Home Depot can sit for years, waiting for a taker. Timing also can be a factor. The property owner of two recently closed Super Kmarts, for example, was fortunate Lowe's was scouting sites for locations in Marana and on the Southwest Side.

It will take months to convert from discount department stores to warehouses, Lowe's corporate spokeswoman Chris Ahearn said. But reusing the Super K buildings enables Lowe's to open sooner than it would if it had to demolish them and start over, Ahearn said. City and county "big-box" laws that restrict construction of stores 100,000 square feet or larger bring "another layer of uncertainty and cost" to a transaction, local commercial broker Rick Volk said.

The ordinances are supposed to shield nearby residents from noise, lights and truck traffic created by supersized stores. But they also discourage retailers from taking on large-scale redevelopments, such as Sunrise Place, of which Volk represents about 103,000 square feet.

Located on the northeast corner of East Speedway and North Kolb Road , the largely vacant shopping center has drawn the interest of big retailers, including Lowe's. "There are two ways the property could go. One is to completely renovate the property by tearing it down," Volk said. The other is to find a retailer to take the space as is.

Creative solutions

Several successful redevelopments in recent years are lighting the way for future ones.

Among them:

* Demolition of a former Montgomery Ward store at the southwest corner of North Oracle Road and West Limberlost Drive for a new Lowe's warehouse and garden center.

* Conversion of the former El Dorado Theater on East Broadway, across from Park Place mall, into a Linens 'n Things, which will open in August.

* Extensive renovation of Monterey Village on the southwest corner of East Speedway and North Wilmot Road, a once underperforming strip center built by Tucson's DeConcini family.  

Today the busy strip is home to Bookman's Used Books, Music and Software, Beyond Bread and other retailers. The key to these redevelopment successes can be summed up in two words: location and traffic, said Debbie Heslop,a retail specialist with Tucson Realty & Trust Co. Commercial.  

"Successful renovations just capitalize on what's already there - great traffic counts and great demographics," she said. That's what local shopping center redeveloper Larsen Baker is counting on as it undertakes a multimillion-dollar face-lift of Circle Plaza on the East Side .

In April, Home Depot moved from a 156,000-square-foot shopping center at the southeast corner of East Broadway and North Kolb Road to a new location, also on East Broadway, west of Pantano Road . The 100,000-plus square feet of vacated space already is spoken for, once it's redeveloped, Larsen Baker principal George Larsen said.

In addition to Ross Dress for Less, which will stay, pending leases include an office-supply store, a home-furnishings retailer, a sporting-goods store and a hobby shop. The area's traffic count is a big reason for the interest. More than 80,000 cars travel through the Broadway-Kolb intersection daily, Larsen said. High traffic, however, can't save all failing retail properties. Sometimes it's the people that matter.

In the wrong place

Big-name retailers are passing on highly visible centers like Southgate , at the southwest corner of Interstate 10 and South Sixth Avenue , because potential shoppers in the area don't have much disposal income.

"These big corporations are not happy with the demographics of the neighborhood," said Janet Snyder, who manages Southgate for 4-D Properties, a DeConcini business entity.

The DeConcini family built Southgate in the 1950s with Roy Drachman, who also built Pueblo Plaza , another struggling center, at the southeast corner of East 22nd Street and South Cherry Avenue , whose lone tenant is a liquor store. While Southgate 's owner is trying to get the property leased, it also has entertained offers to sell, Snyder said. "We could redevelop the center, but you have to look at the cost and whether you are going to recoup that back. You really can't do it unless you have a good anchor," she said. Without one, the Southgates and Pueblo Plazas of Tucson are destined to sink.

* Contact reporter Macario Juarez Jr., at 573-4663 or at mjuarez@azstarnet.com

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