Pop-up COVID-19 testing sites likely benefit from more vacant commercial properties

Amid concerns in the Chicago area about a pop-up COVID-19 testing site operator, I thought: a business that can quickly emerge and offer testing services needs to be able to quickly find properties for their new locations. Brick and mortar businesses have faced issues for years and this has led to plenty of vacant commercial locations.

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Thus, when COVID-19 arrived and swept through the United States in multiple waves, there were numerous potential locations available for testing sites. Throughout the Chicago region and the United States, there are larger vacant properties – from office parks to grocery stores to shopping malls – as well as smaller locations in strip malls and other smaller structures. I got my first two vaccination shots at a former big box store in the far-flung Chicago suburbs. Commercial properties are often located along busy roads and they may have central locations that people can access relatively easily.

If commercial properties were not as available, testing could take place elsewhere including on government properties like fairgrounds or civic centers. For example, the State of Illinois Community-Based Testing Sites appear to be a range of property types.

Additionally, I wonder at the rates a new testing business or a government group would pay for rent and utilities at a vacant commercial property. Has more vacancies also helped make prices more affordable for testing facilities to arise?

And if COVID-19 passes plus there is more interest in commercial properties, testing sites might also fade away. Just like other businesses or organizations who might take up residence in a strip mall or commercial property for a while, COVID-19 testing sites would arise and then disappear again in the commercial landscape.

Choices: lose out to Walmart and Amazon or adopt partnerships with tech companies to stay alive

The many corner stores around the world may be facing a choice about how to survive in the coming years:

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One risk is that the infusion of tech money winds up making these independent businesses look and feel a lot more like chains. “The more you become digital, the more connected you are to the internet,” Lehr said. “The more connected you are to global trends, the more pressure you feel to do certain things.” The Indian start-up Jumbotail allows shopkeepers the opportunity to open one of the company’s branded J24 convenience stores, and S. Karthik Venkateswaran, Jumbotail’s co-founder and CEO, told me he envisions a world where consumers pass four different J24 stores throughout the course of their day. “Ubiquity is extremely important to us,” he said, but added that owners can still customize many aspects of their operations. “Every single store is different.”

But the other possibility is that by partnering with tech companies, these mom-and-pop shops might avoid the fate of getting squashed by giants like Walmart and Amazon, which can afford to sell the same goods at lower prices. To a certain degree, that’s already happened in the U.S., where Americans have been lured away from small businesses by the conveniences of Amazon Prime. “We would love to have Morocco and developing countries have a different fate,” Belkhayat said.

In the global South, millions of these beloved stores could one day end up part of a new digital economy that looks distinctly different from that of the West. Instead of transitioning to big-box retailers, communities will continue relying on the same shops they have for generations, but they’ll have evolved into futuristic outposts that double as tiny warehouses, banks, and grocery-delivery hubs. At least for now, the global tech industry has landed on the oldest trick in the book: If you can’t beat ’em, join ’em.

This choice – either partner with the big retailers or with the tech, finance, and other industries – is an interesting one. It certainly speaks to globalization in multiple ways. In terms of goods, these corner stores sell numerous important items and can provide key hubs for goods or services within a community. As those on the global scene look for ways to invest and make money, the corner store might be a goldmine. And the reach of products and finance and tech around the globe speaks to the numerous connections between people, organizations, businesses, and more. Then, each individual store might have the opportunity to stand out within its particular setting and because of the proprietor even as it slots into a global system.

I would also be interested to hear more about corner stores as local community institutions. In a private society like the United States, there are limited public spaces and shops are not always local or inviting. While a store involves private business transactions, it may also be a regular place for people to interact or utilize important services. If it provides local banking functions, this might involve might private individuals and communal activity.

Sears in Illinois began as catalog, became a department store, and ends in a suburban shopping mall

Sears has come to the end of the retail road in Illinois at Woodfield Mall:

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The last Sears department store in Illinois, which closes Sunday in the Woodfield Mall nearly a century after the retailer opened its first store ever in the Merchandise building, looks very, very…beige right now, in its final hours. Like beige on beige. Like the color of back-to-school Toughskins in 1974, the color of your uncle’s Corolla in 1982 and the color of linoleum at the DMV in any decade.

It opened the same day that Woodfield — named for Sears executive Robert Wood and department store magnate Marshall Field — opened in 1971. It was the largest Sears then, boasting 416,000 square feet of sales floor. From the looks of it in late 2021, it’s hard to imagine anything changed in 50 years…

At its peak, Sears, once the largest retailer in the country, had 3,000 locations, so naturally this Woodfield store is far from alone. Also dead after Sunday are Sears department stores in Pasadena, California; Maui, Hawaii; and Harrisburg, Pennsylvania. Long Island recently lost its last Sears department store; Brooklyn loses its last Sears on Thanksgiving Eve.

Indeed, seeing a Sears department store still serve as the anchor for a large mall right now is like a window into just how stormy and unmoored from the 21st century the American shopping mall has become. Sears sits at the south end of Woodfield, while JC Penny is at the northern end; Macy’s and Nordstroms occupy port and starboard sides.

There is a lot that could be lamented here (and is suggested in the piece): the experiences of many shoppers and employees, the connection of Sears and Chicago, bustling shopping areas now languishing, memories of earlier eras.

I find it interesting that the last Sears department store in Illinois closes in a shopping mall. And this is not just any mall: this is Woodfield, one of the largest in the United States, center of the fast-growing edge city Schaumburg. Department stores hit their stride in central business districts in the United States where rapid urbanization helped fuel consumer activity. But, the geography of business shifted as the population shifted to the suburbs. Department stores continued but now as anchors for a full range inside shopping experience primarily accessible by car. While suburbs are still growing, shopping malls are struggling and the fate of their department stores have both contributed to this decline and been affected by it.

The Internet may have hastened the decline of department stores but I wonder how much the move to the suburbs already weakened them. Stores need shoppers and it makes sense to move department stores closer to those shoppers (and other consumption opportunities). At the same time, the department store in a mall is different than the multiple floor downtown department store. Thinking along the same lines, how different are local stores, Sears, Walmart, and Amazon over time – which is the bigger jump and which factors mattered the most for the shift?

Thinking ahead, could the experience be recreated by putting a new Amazon store in the same spot? The location and infrastructure of the current setting is hard to beat. Shopping in person is still an important experience for many people even with Internet sales.

Brick and mortar success in selling chickens and other farming supplies to new “ruralpolitans”

The shift of Americans from cities to suburbs and rural areas helped boost the fortunes of retailer Tractor Supply:

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Such gangbusters growth is unlikely to continue, with the pandemic easing. But the rush to the country that underpins it is less an anomaly than a speeding up of a long-tern trend, as more people – notably millennials yearning to become homeowners – look to adopt quasi-rural lifestyles. Being priced out of urban living is one driving factor; interest in healthier and more sustainable diets, including homegrown vegetables and home-harvested eggs, is another. Whatever is motivating them, Tractor Supply sees an opportunity in these “ruralpolitans” – and the COVID-driven shift toward remote work will help sustain their numbers.

Lawton, who became CEO in early 2020 after two years as the No. 2 at Macy’s, says millennials’ willingness to move farther from city centers is a “game changer”: “We seeing a new kind of shopper in our stores,” he tells Fortune. Now Tractor Supply is adapting to cater to both its established customer base and these younger space-seekers, following a strategic road map with the folksy title “Life Out Here.”…

The fast-growing cohort that Tractor Supply is cultivating, she says, are “beginning to learn how to garden. They have this passion for poultry.” Call them the “country suburban” customers.

The company is strategic about where it meets these customers. Its stores are almost all located in mid-size or small towns – communities that are often too small to support a Home Depot, Petco, or Walmart.

The economic impact of COVID-19 has hit some businesses very hard while others, like Tractor Supply, have found opportunities. From the sound of this article, they had locations in numerous places that received new residents during COVID-19 and had the right mix of products and service that appealed to them.

I wonder about the class dynamics of all of this. How do the new “ruralpolitans” who want to raise chickens or have a small farm and have moved from the city compare to the other shoppers at Tractor Supply or to long-term residents in the community?

Another question to ask is whether these newer residents with these interests in food and farming are in it for the long haul or not. On one hand, if remote work is more viable than ever, perhaps people will stay in smaller communities outside cities and pursue this. On the other hand, if companies ask more workers to return or if small-scale agriculture and animal husbandry is not appealing in the long run, this may be more of a flash in the pan. Industry-wide shifts in agriculture could have an impact as well.

Finally, the move to a more rural life has implications for private lives and community life. Many Americans say they like the idea of living in a small town but this is different than actually living in one. What is the tipping point where an influx of new residents changes the character of the community (or is change somewhat inevitable)? How involved will these new residents be in local organizations, religious congregations, local government, and in local social affairs?

Target on The Magnificent Mile is preferable to empty retail space

With reports of Target’s interest in moving to Macy’s former space in Water Tower Place along Michigan Avenue in Chicago, I heard some concern about such a normal big box retailer moving into a prestigious retail space. Here is the problem for Chicago and many other communities facing retail vacancies: filling space can be really hard.

Google Street View image August 2019

Brick-and-mortar retailers are not doing well overall. This extends from suburban shopping malls to high-status locations like Manhattan or downtown Chicago.

And this issue is not just about shopping and what people can purchase. Busy retail anchors a number of important activities: sales tax and property tax revenue for municipalities; tourism or visitors from other communities who want to come spend money because of the scene; restaurants and other land uses that cater to those out for a shopping trip. Vacant structures do not just lack these features; their emptiness is also a blight, a suggestion that corporate and visitor interest is low, a reminder that the property is not generating the kind of revenue it could.

Filling large retail spaces is no easy task. Many communities are struggling with this and seeking other land uses (recent examples here and here). A building with some sort of activity, even if it is a downgrade in terms of status, is preferable to no activity. The Magnificent Mile might not seem so magnificent with Target – people can find this shopping all over the place – but it beats becoming The Vacant Mile.

One expert says roughly 25% of shopping malls will survive

Shopping malls were in trouble before COVID-19 but add that in and experts suggest many malls will need to shut down or transform:

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Of the roughly 1,100 malls left in America, Kniffen believes only 278 are viable in the post pandemic world where online shopping will reign even more supreme. These would be the best of the best malls — or “A” malls as experts call them — that are in densely populated areas and target higher income shoppers…

The pandemic has just sped up the day of reckoning for vast stretches of zombie retail real estate. America had a glut of retail space before COVID-19, with twice as many square feet dedicated to shopping as any other country in the world. Retail is oversupplied by six square feet per capita compared to Europe, according to the International Council of Shopping Centers for U.S. merchants, a New York-based retail trade group…

In the U.S., 20%-25% of retail spaces will become vacant in the next few years due to the pandemic, Crowe estimates. Half of the malls in America will disappear over time, said Najla Kayyem, senior vice president of marketing for Pacific Retail Capital Partners, a California-based retail investment and management company

In the end, the concept of a community gathering place known as a mall still makes sense, experts believe. But the days of malls simply being stuffed with pizza places, apparel stores and various kiosks are over. COVID-19 hasn’t killed the mall, rather accelerated its rebirth into something far more useful for the modern era.

Such changes could have wide-ranging effects:

  1. This could produce nostalgia for the era of thriving shopping malls. Imagine a lot more television shows and movies portraying life between the 1960s and 2000s featuring the shopping mall as something from a bygone era.
  2. If many malls need to close, what happens to all the debt involving these properties? Someone will be on the hook for this though perhaps some of the problems could be averted if the pace of closings is slower and some malls are reinvented.
  3. Where will people go to gather? While shopping malls were never public spaces, they did provide space for people to be around each other.
  4. This will likely affect different communities in different ways. Shopping malls in wealthier areas will likely have a better chance of survival – continuing to bring in revenue for communities – while malls in other communities will close and communities will struggle to fill the land.
  5. As is noted in the article, this presents a lot of redevelopment opportunities. Will there be a common approach across shopping malls that everyone tries to copy or will this look different from mall to mall?

Less restaurant and retail business, lower local sales tax revenue

The ongoing effects of COVID-19 on business activity, particularly restaurants, will impact communities:

Restaurant dining room closures resulting from the coronavirus pandemic are wreaking havoc on the industry’s bottom line and upending the lives of many working in the service industry. Those losses also will be felt by communities that rely on restaurant sales taxes and special food and beverage taxes to help fund municipal services. Some suburbs will feel the effects much more than others because of how heavily they rely on such taxes.

Sales taxes at restaurants and bars contributed more than $2 million a week to 83 suburbs, a Daily Herald analysis of 2019 tax records on the Illinois Department of Revenue’s website shows.

In a dozen suburbs, sales taxes from restaurants and bars represented more than 20% of all their sales tax revenue last year…

“It’s not just restaurants and bars, though,” said Rob Karr, president and CEO of the Illinois Retail Merchants Association, pointing out many sources of sales tax have had sharp drops. “Everybody in the retail sector has been negatively impacted, aside from groceries.”

With more Americans eating out in general, the ability of restaurants to draw visitors from other communities, and connections between eating and other recreational and cultural activities, eateries can be important sources of revenue.

Communities can aspire to have a diverse tax base where they draw tax revenues from a variety of sources, including sales taxes and property taxes. At the same time, some communities develop niches where they focus on one business sector or they have a historic strength. Diversification may be difficult to achieve and depend on a variety of forces including actions by local officials and leaders, the demographics of the community, historic patterns, and actions by business owners and larger economic forces. In other words, the character of a community’s tax base develops over time, can change, and at least in part depends on outside actions and forces beyond a community’s control.

It will also be interesting to see where the budget issues that municipalities face fall among the other economic concerns. Sales tax revenues are part of the picture but so might be property values if businesses need to close and there are not other businesses to take their place. If the federal government and states are also facing big hits to revenue, what might happen to municipal budgets?

Looking deeper at Wheaton, Illinois in Walmart’s “United Towns” ad

During the Super Bowl, Walmart ran an ad titled “United Towns.” From roughly 0:10-0:12, there is a a shot of Wheaton, Illinois looking south on Main Street. Here is the view:

WheatonWalmart2020

Four things of note from this short appearance of Wheaton in a national ad:

  1. As a number of Wheaton residents noted online, there is no Walmart in Wheaton. This is true but it obscures the larger story. One, how many Wheaton residents shop at Walmart (there are two within several miles of the town’s borders) as opposed to other big box stores (such as the Target in Wheaton or the several within a few miles)? Or, how many Walmart employees live in Wheaton? Two, there may be reasons Wheaton has no Walmart: it might not have wanted one. The busy stretch along Roosevelt Road is carefully controlled by the city – no big box stores. The largest shopping area, Danada, does not have any big box stores (though it now has three sizable grocery stores). Wheaton had one of the first Target stores in the area but it is located right on the edge of town and a proposed Home Depot across the street did not get approval and is now just past Wheaton’s northern border.
  2. The image captures a feature of Wheaton life: the passing of trains through the downtown and the community. Without the train line, there is no Wheaton (at least the one officially founded in the 1850s). The train may be a fact of life in Wheaton and numerous other American communities but it is not necessarily a welcome one since these trains can delay traffic.
  3. The ad on the whole promotes the ideas of small towns and community life. There are lots of shots of houses and older downtown buildings. But, is Walmart both a rural/small town as well as a suburban phenomenon? Without suburban stores – meaning Walmart locations along main roads, within sprawl, and dependent on driving – Walmart is not the company it is today. Like many Americans, Walmart might promote the ideal of small towns but not really live in that world.
  4. Connected to #3, the shot of a cute or quaint suburban downtown is an interesting contrast to the effect of Walmart in the American economy plus the larger changes in which they participated. Wheaton’s downtown is in okay shape but imagine what it could be without big box stores. More broadly, downtowns across the country pursued different options to counter the changes in retail and shopping in the postwar era (starting with shopping malls and strip malls and later extending to big box stores).

Millions of dollars flying out of the King of Prussia Mall

Recently walking through the King of Prussia Mall at Christmas time, I was struck by multiple sights: the variety of shoppers, the Christmas cheer and decoration, and the number of possible activities in and around the mall. Yet, none of these could compete with my biggest realization that day: just how much money was flowing in and out of the mall.

The King of Prussia Mall is one of the biggest in the United States , is in the top 10 of malls by sales, and it helps anchor an edge city roughly twenty miles northwest of Philadelphia. It is a site to behold, particularly after an addition a few years ago that connected the two halves of the mall and added a new row of upscale retailers.

But, the biggest goal of the mall is to generate sales and profit. And it looked like the mall was doing just fine on the day I visited. Many shoppers had bags on their arms or strollers. Multiple stores I went into, ranging from smaller retailers to large department stores, had people perusing the racks and shelves. The type of stores at the mall and the people aiming to go into them also hint at the money consumers were willing to spend. With each American estimated to spend a little over $900 on Christmas gifts, the King of Prussia is a good place to spread that cash around.

The commercial activity around Christmas at this mall also hints at the future of shopping malls in the United States. Some malls might last longer than people think, particularly those located in wealthier areas and with a concentration of wealthier stores and a variety of opportunities (retail ranging from Dick’s Sporting Goods to Nordstrom’s to Primark and including restaurants and entertainment). The King of Prussia Mall is a destination mall, likely drawing visitors from a wider region than most malls.

And with all that money flowing around the mall that day, most people looked happy to be spending and enjoying the sights. I suppose those with fewer resources or anti-capitalists might not go to such an upscale mall in the first place but the whole scene looked like an advertisement for capitalism: spend freely in an impressive mall at Christmas time. What could be more American than that?

Beleaguered shopping malls face more closing stores

Shopping malls face multiple challenges, including more and more store closings:

It’s only April, but already this year more store closures — nearly 6,000 — have been announced than in all of 2018…

U.S. retailers so far have announced they will shut 5,994 stores, while opening 2,641, according to real estate tracking done by Coresight Research. That’s more locations slated to go dark than during last year. In 2018, there were 5,864 closures announced and 3,239 openings, Coresight said.

The planned closures include more than 2,000 from Payless ShoeSource, which filed for bankruptcy, hundreds from clothing retailers like Gymboree, Charlotte Russe, Victoria’s Secret and Gap, and discount chain Fred’s. Meantime, chains like Aldi, Dollar Tree, Ollie’s Bargain Outlet, Five Below and Levi’s are planning to open more stores…

With more store closures likely on the horizon, consumers can expect to start seeing hotels, gyms, apartment complexes, more food halls and grocery stores at traditional malls, turning them into more like city centers. The new Hudson Yards mall, which opened in New York last month, is the perfect example of this mixed-use model.

Before long, shopping malls may morph more into entertainment and public spaces than shopping spaces. In today’s world, it is not enough to cluster a bunch of national retailers together in an indoor or outdoor setting surrounded by plenty of free parking. The era of teenagers hanging out at the mall (and efforts to counter those gatherings) may be over. And it may not be only shopping malls that are in trouble; this may not be an issue of too much suburban sprawl. Rather, shopping districts all over the place, even in Manhattan, may be threatened. Some of these shopping areas will continue, particularly those surrounded by wealth or those that offer unique “cosmopolitan canopies.” Others will be transformed to the point that it will be very difficult to discern they were once shopping malls.

Furthermore, it will be interesting to see how these retailer brands disappear into the night or return in new forms or with new emphases or new money. Will Payless come back? Is Gap in its death throes and will its lessons be absorbed by companies taking up that same business space? Can Sears hang on another decade or even make a comeback?