October 14, 2019

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Big Box Redux: Dilemma of Abandoned Big Box Stores

During the 1980s and 1990s "big box" retail locations popped up all over the United States. In the past few years, however, a number of larger chains, including Sears, Kmart, Circuit City, and Sports Authority, to name a few, have closed or announced that they will be closing their doors. The question remains: what can and should be done with an empty big box location?

While it would be easiest to replace one big box tenant with another, three main hurdles exist to this approach. First, some big box retailers may choose to just "go dark" and continue to pay the rent at the location in order to maintain market share. Second, many big box leases include clauses prohibiting the landlord from leasing space to a tenant's competitors even after the tenant has vacated. Third, and most significantly, abandoned big box buildings in popular retail locations likely already have other successful big box retailers nearby, thus limiting the pool of potential new tenants for that space. As a result, very often the space will need to be demolished or repurposed, adapted, and redesigned.

Adaptive reuse and redesign of abandoned big box retail locations requires property owners, developers, and financiers to get creative and be committed in pursuing reuses that fill the specific retail needs of their geographic markets. The large space may need to be subdivided and leased to multiple tenants. Adaptive use of large retail spaces requires vision, foresight, a deep understanding of the local retail market, and the marketing expertise to find alternative categories of tenant. Potential tenants for adapted big box locations are those that can take advantage of some of the features of these abandoned stores, such as large open spaces, ample parking and a centralized location close to major transportation routes. Some of these alternative reuses of big box locations include: apartments/condominiums, hospitals/health care clinics, museums, churches, commercial gyms, and offices.

Like owners and developers, municipalities also have an important part to play in redevelopment of abandoned big box locations. Municipalities must be flexible and utilize any number of tools at their disposal to ease the development costs and bureaucratic burden to the reuse and adaption of abandoned locations. One municipal tool that could minimize the barriers to reuse is the creation or revision of local zoning ordinances to incentivize reuse and ease some of the financial development hurdles. This process may include rezoning of the area in question to allow for residential, office and light industrial, instead of strictly commercial uses. Second, the municipality could create a tax incremental financing district to make a potential redevelopment more financially attractive or viable to potential developers. Finally, the municipality or its community development authority could acquire title to the abandoned property to utilize for its own purposes (such as a school, library or community center) or to better control and manage redevelopment and associated financial incentives.

In summary, one size does not fit all. Rather, the dilemma of what to do with an abandoned big box retail location often requires all involved (the leasing, design, finance and legal teams, as well as the municipality) to think outside of the box and be flexible, thoughtful and creative in crafting an individualized plan and solution tailored to that particular locale. 

©2019 von Briesen & Roper, s.c

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About this Author

Chris A. Jenny, von Briesen Roper Law Firm, Madison, Corporate, Real Estate and Family Estate Law Attorney

Chris A. Jenny is a Shareholder in the Madison office of von Briesen & Roper, s.c. He focuses his practice on representing business owners in a wide variety of niche markets to become more profitable while minimizing their risk and expenses. Chris’s practice has a heavy concentration in the real estate, construction, and information technology industries. This practical experience is a tremendous benefit to the contractors, suppliers, landlords, tenants and real estate developers he represents. Chris’s construction...

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William West, von Briesen Roper Law Firm, Milwaukee, Corporate and Real Estate Law Attorney

Bill West is a Shareholder. He Chairs the Firm’s Business Section and the Firm’s Mergers & Acquisitions Section.

Bill is a trusted advisor to his clients and they rely on his ability to achieve desired outcomes in a practical, timely and cost-effective manner – in other words, he gets things done. He has over 30 years of experience in corporate and business related transactions including:

  • Mergers and acquisitions

  • Complex corporate and commercial transactions

  • Corporate governance and business counseling

  • Business formation, strategy and structure

  • Business succession planning

  • Commercial real estate

Bill’s clients are involved in a range of industries, and include public and privately held businesses engaged in a wide variety of domestic and international transactions including asset and equity acquisitions, mergers, reorganizations, divestitures and restructurings.

Bill is also co-chair of the firm’s Retail Real Estate section. He represents clients nationwide in the purchase and sale of commercial real estate. Bill has a national practice handling the retail real estate leasing needs of both tenants and landlords.

Bill is a member of the American Bar Association (member of the Business Law, Real Estate and Taxation sections), and the State Bar of Wisconsin. He is also a co-author of LLCs and LLPs: A Wisconsin Handbook, 1st, 2nd and 3rd Editions, published by the State Bar of Wisconsin.

Bill is recognized by The Best Lawyers in America® as “Lawyer of the Year” for Closely Held Companies and Family Businesses Law in Milwaukee (2017). He is listed in The Best Lawyers in America® for Business Organizations (including LLCs and Partnerships) (2015-2018) as well as Closely Held Companies and Family Businesses Law (2014-2018).

Bill served as Chair and a member of the Board of Directors of Catholic Memorial High School.

414-287-1375
Nathan Fronk, von Briesen Roper Law Firm, Milwaukee, Corporate, Finance and Construction Law Attorney

Nathan Fronk is a member of the Litigation and Risk Management Practice Group. He represents businesses, insurers, financial institutions, health care providers and individuals, helping them solve their commercial and contract disputes, business torts, construction defects, product liability claims, and environmental matters. Since 2013, Nathan has been recognized as a Wisconsin Rising StarSM in the area of Civil Litigation Defense.

Nathan counsels clients on a wide variety of environmental compliance and enforcement issues under...

414-287-1497