Treating hemorrhaging retail with a tourniquet.

It’s a topic I can rarely avoid for long: the ups and downs of the American retail landscape.  Originally, I had planned to combine this essay with the previous one, on the aged Venture department store in a tired community not far from East Saint Louis.  Then I realized that, while not a meaty topic in and of itself, it’s still worthy of a discrete post.

One of my first lengthy articles on American Dirt scrutinized a completely blighted, vacant strip mall in the otherwise booming Indianapolis suburb of Plainfield.  During my first “reconnaissance”, back in July of 2009, the strip mall looked like this:

The gray-blue color scheme offers a none-too-subtle cue of this strip mall’s past: an earlier generation of Wal-Mart, dating from before the world’s largest retailer embarked on a nationwide expansion of the gross leasable area of its stores by adapting the Supercenter typology.  Not surprisingly, Plainfield’s busy Wal-Mart Supercenter stands less than a mile away from this sad relic, which probably lost all of its ancillary tenants within a few years after the Wal-Mart relocated.  The result is a sprawling facility that in 2009 was 100% vacant.  Such blight is far more reflective of a struggling, impoverished community—the last words anyone would use to describe Plainfield, a municipality that grew over 50% between the 2000 and 2010 censuses.  So why does Plainfield have such a forlorn-looking commercial property when, by almost every metric, the suburb is booming?

The answer, as always is simple: an oversupply of retail.  My speculation in 2009 was that this strip mall would continue in this state of desuetude until a developer demolished the entire property and started anew.  It would be quite a waste, since the structure was probably less than thirty years old, but such is the life cycle of American commercial/retail real estate.

I’m pleased to announce that time has proven me wrong: a more recent visit reveals that, at the very least, the anchor tenant space formerly belonging to Wal-Mart found a new lessee.

That’s right: the persistently successful Burlington Coat Factory, a national chain that has found its way into the content of several of my blog posts over the years.  While economic development leaders in Plainfield no doubt saw the opening of Burlington last summer as a godsend, it’s hard to conclude that it led to any spillover benefit.

In fact, visual evidence suggests the exact opposite: the rest of the strip mall is just as vacant as it was four years ago.

My previous posts have alluded to a strange phenomenon regarding Burlington Coat Factory that distinguishes it from many other national retailers: even as the company’s brand name continues to expand, it only manages to galvanize its association with depressed real estate.  The reputation has escalated to the point that even those who aren’t dorks about this sort of thing have begun to notice it; I don’t know who first coined the phrase “the Grim Reaper of the Retail World”, but it certainly wasn’t me.  (Though I admit I have helped to perpetuate the nickname.)  Think of any dying mall.  Chances are good that, even if 80% of the GLA is vacant, the property still can claim a Burlington Coat Factory.  One shopping node that I featured recently, the old Bannister Mall area in Kansas City, flourished until the mid-1990s but is now completely devastated.  It is a virtual wasteland, with millions of acres of vacant strip malls, pockmarked parking lots, and piles of rubble where the Bannister Mall once stood.  Yet, amidst this desolation, the Burlington Coat Factory lingers as one of the few surviving retailers.  Across the country, this discount retailer conspicuously seeks long-vacant big-box outlets as part of its conservative expansion plan.

What’s interesting about Burlington Coat Factory is that its primary competitors—T.J. Maxx and Marshall’s come to mind—share much of the same inventory and attract a fairly similar clientele, but they lack the same association with blight.  The expansion strategy of these two alternatives to BCF is simply a little less transparent.  Interestingly, BCF has been owned since 2006 by Bain Capital, LLC, the private equity firm most broadly associated with presidential candidate Mitt Romney.  I’m not going to swat at a political hornet’s nest by elaborating upon this potentially illuminating connection, except to indicate that the firm and its portfolio (Dunkin’ Donuts, AMC Entertainment, Clear Channel Communications, Staples, among many others) have weathered the turbulence of the recession from the last few years without any widely publicized missteps.  While Burlington Coat Factory’s approach doesn’t seem to be hindering its steady growth from year to year, the company consistently fails to elicit any in-line businesses in the vacant space nearby.  It’s completely ineffective as an anchor tenant.  Most of the dying malls that host a Burlington Coat Factory fail to resuscitate the remaining leasable space, sometimes to the extent that BCF may be the sole survivor.  And yet Burlington trudges on.

I would hardly begrudge Burlington Coat Factory of its business model.  Since distressed strip malls are only likely to grow in number over the upcoming years, it’s refreshing to find a successful business willing to lease space in properties that most other major brands won’t touch.  At the same time, such a company could easily cajole a guileless public official into forging a partnership in order to revitalize a huge swatch of long-vacant commercial real estate, which would be about as quixotic of a contract as a subsidy to locate a server farm in south Florida.  The multiplier effect—a principle that helps to account for spillover economic activity generated when a major new employer breaks ground—simply fails to materialize wherever a Burlington chooses to locate, so tax incentives are likely to flop uniformly, as far as generating any real ROI.  Hopefully most civic leaders know better than to try to lure a BCF to their town with public dollars.  But I could see a desperate, white-flight, revenue-starved inner-ring suburb with housing from the mid 20thcentury and a giant dead mall right in the middle (think of Cleveland’s suburb North Randall or Birmingham’s suburb Bessemer) making such a foolhardy move.  Then again, it might even take place at the state level: apparently the New Jersey Economic Development authority approved granting Burlington Coat Factory $41 million in tax credits last year, in order for it to keep its corporate headquarters in Burlington County.  But hey—it’s a well-run company, so who am I to judge?  The torso, at any rate, appears a lot healthier than its extremities.

5 thoughts on “Treating hemorrhaging retail with a tourniquet.

  1. Steve P

    Great read, as usual. BCF was at Eastgate Consumer Mall on the Eastside of Indianapolis, but the strip eventually died totally, and then has had fits and re-starts. You might check out that strip center to see if it fares better than Plainfield’s forlorn strip.

    I enjoy your work immensely, Eric!

    Reply
  2. Astara

    Fascinating. As a retailer, I take great interest in these types or posts. Although I have remained in specialty retail for my entire career, big box phenomena definitely underscore the fate of the boutique.

    Reply
  3. AmericanDirt Post author

    Trust me, Astara…I have more than a soft spot in my heart for the specialty places too. Sometimes the trends with the big guys are just easier to spot. Steve, I don’t know the east side that well (certainly not from the day when Eastgate was still around), but it doesn’t surprise me one bit that BCF had a location there. What I DO know, however is that Eastgate is being gutted–quietly–to form the new Indiana headquarters for the Department of Homeland Security (no need for me to explain why it’s happening quietly). This is common practice, since I know the Homeland Security offices in south Texas for Hurricane Ike were in a dying old mall.

    Reply
  4. AmericanDirt

    Well, I’m not sure what else to call it. It originally hosted a Wal-Mart as the anchor and then a series of small inline stores attached to the west of the Wal-Mart. I’d call those inline stores a strip mall in and of themselves. Today, the anchor is the Burlington Coat Factory, but all the inline storefront space–the strip mall–is still vacant.

    Reply

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