Aberdeen XChange: a growth machine that choked before the engine’s finished revving.

In the Baltimore exurb of Aberdeen, Maryland, a brand-new strip mall sits on a corner at a moderately busy intersection, awaiting a tenant.IMG_8874Aberdeen XChange completely vacantIMG_8880Aberdeen XChange is not bad looking, as strip malls go. It aligns with contemporary architectural standards for this type of thing: its chief cladding materials consist of tan fake stucco (probably EIFS) and a brick veneer, with black awnings and lots of windows.IMG_8879It boasts copious tree islands in the well-striped parking lot.IMG_8876One of the storefronts at the western end features a side window for potential drive-thru service.IMG_8881And the back features separately designated parking for employees, truck unloading, and a shielded dumpster.IMG_8882Aberdeen XChange isn’t making any waves; judging from a superficial survey of the premises, it’s a predictably but competently designed strip mall. And it stands less than a half-mile from the U.S. Army’s Aberdeen Proving Ground (APG), by far the largest employer in the immediate area.

Nonetheless, as of January 2018 (when I took these photos), Aberdeen XChange was unoccupied. I can find no evidence that it has secured a single tenant in the year that has transpired, and, to be perfectly blunt, I don’t see much of a chance that things will change in the near future. I suspect it will remain vacant for months—possibly years.

None of the socioeconomic indicators favor a place like Aberdeen XChange. First of all, it’s possible that construction ended a few years prior; the only evidence I can find is a Google Street View from November 2015, before it was complete. If we speculate that construction ended in the summer of 2016, it’s likely that the structure had already sat empty for eighteen months when I took the photo. Secondly, just because the developer picked a prominent intersection near an employment hub doesn’t guarantee that he/she chose the right intersection. Check out the map below, where the purple circle indicates the location of Aberdeen XChange.Aberdeen mapThe entrance to APG is where MD 715 (Aberdeen Throughway) cuts off to the southeast. And our strip mall in question is even closer to a busy Walmart Supercenter. However, the Walmart’s primary entrance is not Old Philadelphia Road but US 40 (Pulaski Highway) just to the north, a major arterial that receives considerably more vehicular traffic than this marginalized, historic path. Old Philadelphia Road merely offers a secondary means of ingress and egress for the Walmart. Not surprisingly, Pulaski Highway hosts the preponderance of Aberdeen’s commercial and retail uses. That said, it’s hardly a flourishing corridor, filled with drab retail buildings and strip malls that largely cater to low-end businesses like storefront churches. I featured one of these eyesores a year ago. Walmart is by far the most active commercial node in the area. The only other newish tenant is a Home2 Suites by Hilton, but it too has a primary entrance on Pulaski Highway.  Even if the intersection of Old Philadelphia Road and Aberdeen Throughway were as prominent as the developed undoubtedly would like to think they are, this is the wrong side of town, as far as retail is concerned. Aberdeen’s more prosperous corridor (Target, Home Depot, ShopRite), is to the north, near the interchange of Interstate 95 and MD 22. Judging from the age and general condition of the commercial buildings along Pulaski Highway, little demand exists to invest in and upgrade commercial properties, which doesn’t bode well for a new strip mall like Aberdeen XChange, whose owner undoubtedly seeks to attract nationally known tenants of the type that are quite rare on Aberdeen’s south side.

But location, location, location is hardly the primary reason I’m ringing the death knell for Aberdeen XChange before it’s even had a chance at life. The fact is—as I’ve noted numerous times on this blog—the country is facing a surfeit of commercially oriented real estate unlike anything we have seen before. And the U.S has always suffered an oversupply of retail-oriented buildings, at least compared to other peer nations. However, with the consumer’s burgeoning fondness for online shopping, we aren’t just facing a glut of real estate; we’re suffering an unprecedented paucity of potential, financially solvent tenants. With the latest announcement of the liquidation of Payless Shoe Source, the nation’s shopping centers are about to face about 2,100 new vacancies. It’s a brutal climate out there for commercial property managers.

Bearing in mind the prevailing conditions, why did Aberdeen XChange get built? Surely the developer saw the writing on the wall, and if not, couldn’t the bank have raised the red flag? It’s not like this is a new phenomenon. I’ll reduce my speculation to a few scenarios:

  1. The developer purchased the land and secured the construction loans years in the past, maybe even before the Great Recession, at a time when retail still seemed generally healthy. The developer and equity partners proceeded with their plans when the economy recovered sufficiently, but they faced other hurdles that delayed completion until 2015 or 2016; thus they began the process during a favorable market cycle and ended during a distinctly unfavorable one. Nothing caused the banks to pull out of the loan because, aside from the retail apocalypse, most other economic indicators have remained quite strong for several years.
  2. The landowner is a naïf. When considering these obscure parcels just up the road from Nowhere, it’s far more likely that the property remained in the hands of a private individual instead of a development company. The landowner may have sought a chance to invest, possibly wrapping the process up in a sort of trust or inheritance, but didn’t perform the due diligence. The banks may have loaned best more on the landowner’s creditworthiness rather than the viability of the undertaking. Oops.
  3. APG is anticipating an expansion in its mission, which it has not yet communicated to the general public, but the owner of Aberdeen XChange new about it (perhaps because he/she already works at APG). This expansion will inevitably spawn a multiplier effect on the region, so that spin-off jobs may not rest within the installation’s controlled perimeter but need proximity, like a strip mall just down the road. Clearly this is the most optimistic outlook, but also the least likely. Pollyannaish.

 

IMG_8877IMG_8878In due time, Aberdeen XChange will probably secure a tenant. But it won’t come in the fashion the development team had hoped for: after all, the pro-forma undoubtedly depended on a reasonable level of absorption at this point. It is currently generating no revenue, and it may have to lower its leasing rates to secure even a single tenant. If that fails, the bank may have to foreclose, and then a team of real estate investment trusts—those that specialize in challenged assets—will likely buy the property and reorient it toward subprime tenants: probably nonprofit organizations or small non-retail businesses that don’t really need a building on a semi-prominent corner with windows and a huge parking lot.

Regardless of what happens, the outcome for Aberdeen XChange isn’t what the development community had in mind for strip malls back when they were springing up like mushrooms in the 1980s. They were foolproof; that’s why they were everywhere, and at least partially why our suburbs are facing such a crisis in their overbuilt auto-oriented commercial districts in 2019. Then again, the fate of Aberdeen XChange was unanticipated as recently as 2012, and since market forces morph even faster than buildings deteriorate, we may be on the brink of a new trend that puts all these boring shopping plazas back to economic fecundity. Year-round hydroponic gardens, anyone?

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18 thoughts on “Aberdeen XChange: a growth machine that choked before the engine’s finished revving.

  1. AvatarChris B

    Just for fun I googled Aberdeen Xchange. The leasing listing popped up…and there’s a local pub “opening spring 2019” in the drive-thru endcap.

    I’m surprised the payday loan store and smoke/vape shop aren’t there already, being at the gate of a defense facility. It’s definitely too small for Burlington, and Payless Shoe is off the table…

    Reply
    1. AmericanDirtAmericanDirt

      While I came across the brokerage site (https://www.mackenziecommercial.com/property-search/aberdeen-xchange/) as well as its Loopnet profile. Where’s the info about the local pub? That sounds like the sort of thing that might be covered in a Business Journal.

      Regardless, it appears the strip mall was completed in 2016, meaning it has sat vacant for nearly 2.5 years. I’d agree that your prospective tenants seem the most likely. Or a Dollar Tree.

      I’m almost wondering if the brokers have worked to improve the algorithm in the last few days. As recently as Sunday, when I typed “Aberdeen XChange” into Google I mostly received links to military exchange locations at Aberdeen Proving Grounds.

      Reply
      1. AvatarChris B

        I went one step further: click on the “brochure” button, and the PDF download displays the floor plan showing the assigned location of “Bushmill Tavern Express” in 2520 sf. at the SW end. The original Bushmill is nearby, at 4017 Philadelphia Rd, Bel Air, MD.

        I totally didn’t think of Family/Dollar Tree/General (or Great Clips, a nail salon, Little Caesar’s, or carry-out Chinese or Thai). One of them will be next, I reckon. 😉

        Reply
        1. AmericanDirtAmericanDirt

          Yep, at least one of them. The fact that this strip mall wasn’t really designed to support an anchor tenant (or even a relative anchor tenant) is potentially another drawback. It’s not clear to me that the floorplates would be appealing even to a nationally known dollar store chain. The Bushmill Tavern Express may be about the best thing it can ever hope for. Further down the road to the southwest are tons of logistics centers, but warehouse jobs aren’t exactly employment nodes, and becoming more automated by the day. Meanwhile, the population at military installations fluctuates widely from year to year. Not a great base line for retail.

          Reply
  2. AvatarMaytte

    Commercial rents are way too expensive for a local business owner, specially if they are young or first time entrepreneurs so those places always end up with big chain stores or doctor’s offices. Do we need more of those? I rather see developers favor locals to boost economy, but what do i know? Only that i can’t afford those places for the few ideas i have. A shame.

    Reply
    1. AmericanDirtAmericanDirt

      I’m with you… new shopping centers definitely want to get the most bang for their buck, so they keep the leases high enough that entrepreneurs often can’t afford. They love chains because they have deeper pockets and are less likely to fail after two years (or used to love chains, before the chains all started going out of business!). Then again, with the chains closing and the oversupply of real estate becoming increasingly obvious, we may soon reach a point where formerly top-tier commercial centers have to lower their rates enough to attract the mom-and-pops, or else they’ll stay vacant…

      Reply
      1. AvatarMaytte

        I used to travel a lot on highways and I stopped stopping at little towns anymore because they all offer the same junk: chain shops and restaurants… boring!

        Reply
        1. AmericanDirtAmericanDirt

          Give it time, and we might get back to that point again. Main streets are starting to revitalize, and not every one of them is getting filled with new locations for Panera and Five Guys. It’s pretty clear that people are rejecting national chain restaurants (particularly the table-service oriented ones, like Friday’s and Applebee’s) in favor of the locally run stuff. As for retail, well, it seems like it’s still the battle of bricks versus clicks, and clicks are winning…

          Reply
          1. AvatarChris B

            The issue with some “locally owned” places, especially mini-chains, is that Sysco might very well be providing the same heat ‘n’ eat entrees at the back door as O’FridayChilibees serves.

            Reply
            1. AmericanDirtAmericanDirt

              You’re probably right on this. Lots of uninspired mom-and-pops. But the ones who take the easy way out are likely to lose to the mom-and-pop a quarter mile down the road that more or less offers the same cuisine but with fresh ingredients or a personalized touch. Usually. Or they lose out to the chain, that can do the exact same thing and rewards us (at the very least) with consistency and a good presentation.

              Case in point: several years ago (prior to Doordash and Grubhub), when I was doing work often carless in Trenton, NJ, the downtown scene was so bleak (and often unsafe) after 6p that there were basically two restaurant options: a New Orleans place and a Subway. I gave the Creole restaurant two attempts, one of which was so inedible I had to make the rest of my meal out of the hotel vending machine. For most meals during the remaining two months I had Subway.

              Reply
        2. AvatarAlex Pline

          FYI Charles Marohn from Strong Towns has written extensively on the financial incentives behind this kind of commercial development. Ultimately, it may be in the developers best interest to keep the rents high even if that means no tenants. It’s rather perverse.

          Reply
          1. AmericanDirtAmericanDirt

            yep. That certainly seems to be the case in high-rent districts like Manhattan. I hope that’s not yet the case in a more middle-of-the-road area like Harford County MD. Especially given that this building near Aberdeen has not yet had a single tenant, so one would assume the owner would still need to resolve much of the debt from construction loans. So if you’re correct even in this context, we may be in for an even bleaker retail forecast than we currently can imagine.

            Reply
  3. AvatarAnonymous

    I believe that it was completed not that long before you visited, not 2016 as you speculated.

    The Bushmills Express is being fitted out as I type this.

    Aberdeen Proving Ground doesn’t have many active duty troops. Most of them left due to BRAC. The on base retail has suffered and a fair amount of it closed.

    . There are a number of contractors on the base, though there is quite a bit of office space that sits empty.

    Recently read construction was completed at/leading to both entrances. But I don’t know if that was due to failing road conditions or in anticipation of growth.

    That being said, it honestly surprised me when this strip mall was built because it seemed like a poor location.

    But a huge warehouse building is under construction directly opposite of this strip mall and the Walmart, so if stores that would cater to that type of clientele were to open they might be successful. I am thinking of QSR resources and possibly a convenience store.

    A significant portion of the employees on the base most likely live outside the immediate area so it might be a challenge to get them to patronize any of the businesses.

    The part of Aberdeen that the strip mall is in is the depressed part of town so I’m not sure what middle or high end businesses would survive. And there is already a glut of available space for things like store front churches, nail salons, etc.

    The one saving grace is that the intersection is signalized. That wasn’t always the case.

    Reply
    1. AmericanDirtAmericanDirt

      Thanks for these details and an update on this area. From your description, it sounds like the situation might improve with considerable investment, which I’d agree with you is something that side of town needs. From my own work in the area, I do recall plans for considerable commercial development (mostly office park) at the MD 715 entrance to APG, north of the well-used Ruggles Golf Course, on land that belongs to APG despite being outside the APG’s walled perimeter. And, of course, the prospect of warehousing in the area continues to be strong.

      It’s a shame that the city of Aberdeen doesn’t have a more well-developed downtown/main street given its size. But the 1950 Census showed Aberdeen had about 3,000 people; it now has over five times that amount. But downtowns–and the pedestrianized architecture to support them–generally tend to reflect the size of a municipality in 1950 then at present…which explains why so many places in Texas may have 75,000 people but a downtown that is little more than an intersection. Fortunately, an excellent downtown exists in Havre de Grace not too far from Aberdeen.

      Reply

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