Rebuilding Place in the Urban Space

"A community’s physical form, rather than its land uses, is its most intrinsic and enduring characteristic." [Katz, EPA] This blog focuses on place and placemaking and all that makes it work--historic preservation, urban design, transportation, asset-based community development, arts & cultural development, commercial district revitalization, tourism & destination development, and quality of life advocacy--along with doses of civic engagement and good governance watchdogging.

Friday, January 06, 2017

Supermarkets (and cinemas) and "captive leases"

A captive lease is when a retailer closes a store but continues to pay the rent on the abandoned space to prevent it from being re-leased to a competitor.  Typically this happens most with grocery stores and cinemas.

My personal experience with this was in the H Street NE neighborhood in DC, where Safeway closed two smaller stores (and other smaller stores in other neighborhoods) when they opened up the large multi-neighborhood serving big store at Hechinger Mall in the early 1980s.

By the time I moved to the neighborhood in the late 1980s, people had changed their shopping patterns, further reducing customer traffic for the H Street commercial district.  One of the store spaces remained empty by then, while the other had been leased to People's Drug (and after that, a Murry's Food Store).  See "Ensuring that lease restrictions don't encumber a commercial property's future."

It's come up more recently with supermarket closures in Suburban Chicago and now Cleveland.

In the latter, Giant Eagle Supermarkets just announced the closure of two stores and a gas station, and the Mayor of Cleveland, Frank Jackson, isn't happy based on this letter ("Mayor Jackson responds to Giant-Eagle closures," WKYC/NBC).  From the letter:
The closure of these stores would require a customer to travel another several miles on the east or west side to one of your stores by car.We also learned that over 120 jobs are at risk. We have been provided no information on whether these employees have been offered positions at other stores and we have received many calls today from concerned employees who also just learned that they will be without a job in thirty to sixty days. The closing of pharmacies on January 14, 2017 means that customers have just ten (10) days to transfer prescriptions, placing a hardship on many of our seniors and those with disabilities for whom this process can be very difficult.

We are also concerned that if these stores remain closed that the remaining term of the lease will prevent other grocery stores from leasing at these locations, to limit competition which was done when Giant Eagle moved from Lorain Avenue to the newer West 117th store. These vacant stores are a negative influence on our community and can affect other leases for nearby retail.
What he needs to do is get the City Council to pass legislation making so-called "captive leases" illegal. DC passed such legislation in 2014 ("D.C. Council bill aims to save Palisades grocery store," Washington Business Journal).

From the Crain's Chicago Business story, "Why some former Dominick's stores are still empty":
Vacant grocery stores inconvenience residents, slash sales tax revenue and can diminish a neighborhood's reputation as a viable retail center. They also can devastate nearby retailers, along with the owners of shopping centers lacking an anchor tenant to draw in the masses.

“It's a stigma on the neighborhood that a grocer is leaving and not being replaced immediately,” says retail broker Dan Tausk, a principal at Oak Brook-based Mid-America Real Estate Group, who represents the Trader Joe's chain in Chicago. “It's devastating in all aspects.” ...

Although the 19 vacant Dominick's buildings have different owners, Albertsons has long-term control over many of the spaces through its leases. In some cases, it has exercised options to extend the leases on empty spaces, according to real estate sources.

By keeping control of those spaces, Albertsons can sublease them to nongrocery retailers that don't compete with Jewel stores, or consider opening its own stores.

“In most cases, the landlords would rather have control of the space,” Witherell says. “In reality, most of the spaces are controlled by (Albertsons).”

In the most unusual scenario, Itasca-based Tony's Finer Foods has been unable to open a store in a Schaumburg building it owns. Tony's announced plans last year to take over a former Dominick's on Roselle Road, shortly before buying the building for almost $6.9 million in July, according to Cook County property records.
Chicago Tribune photo.  Also see "'Dark' former Dominick's stores frustrate suburbs."

In the year since that story was written, local governments in suburban Chicago are working together to try to get the lease owner, Albertsons, to release restrictions.  Interestingly, the stores had been owned by Safeway, when Safeway wasn't owned by Albertsons.

Now that it is, the company is not interested in the buildings being leased supermarkets, because Albertsons still owns Jewel Supermarkets, the market leader in Chicago.  From "Suburban leaders ask Albertsons to work with them to fill vacant stores," Chicago Daily Herald:
Leaders from nearly a dozen suburbs gathered Thursday in Naperville to express their concerns with leases on former Dominick's locations that have been sitting vacant for nearly three years.

The mayors and village presidents of Bartlett, Buffalo Grove, Glen Ellyn, Fox Lake, Naperville, Oswego, Palatine, Palos Heights, Romeoville, Schaumburg and Woodridge gathered for a news conference in which they called upon Albertsons, the parent company of Jewel-Osco, to do more to fill the spaces.

"The damaging effects of keeping these spaces vacant is very difficult for a lot of these communities," Naperville Mayor Steve Chirico said. "We need to do a better job working together and putting the community first, and right now the communities are not being put first. We're asking for their help. We need to see some participation." ...

However, leases on 15 vacant Dominick's continue to be paid for by Albertsons. On Thursday, municipal officials said they want the practice of extending those leases to cease.

"When you're leasing a space that doesn't have a tenant and you're renewing that lease for five years purposely so you can control whatever goes in there, that's where we're having an issue," Bartlett Village President Kevin Wallace said.

Romeoville Mayor John Noak said there is interest in the vacant spaces and willingness from suburban leaders to work with Albertsons to get them filled, but the company is not cooperating.
These suburbs should develop and pass model legislation making captive leases illegal. Chicago did this about 10 years ago.

Cinemas.  I mention cinemas in passing because as companies moved from small locations of one to three screens to large screens, they would put similar lease restrictions on the buildings.  That's why so many cinema buildings have been converted to other uses like pharmacies--CVS is particularly fond of such buildings, although they are not the only company.

01242008-54A Rite Aid in Capitol Hill neighborhood of Seattle is in the old Broadway Theater building, and Rite Aid maintains the theater marquee.

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At 1:47 PM, Anonymous Anonymous said...

funny how the DC city council makes arbitrary moves to save heritage businesses- they are not at all or by any means comprehensive in these actions and they allow REAL heritage business to falter and disappear. Just like their tax increment financing schemes- they are not done in a fair or equitable rational manner nor is any real thought gone into their proper distribution...

on another note- it will be interesting to see the results of all of the construction going on at the Buchanan School site and future Safeway area- hopefully the Safeway replacement will not be a nameless faceless looking piece of garbage that will have to be torn down in another 20 years after all tire of looking at it. Much is slated for development in this part of the city which has been neglected for decades. The DC city block to the south of Safeway is also up for development- it is now a warehouse and storage zone with some rather nice municipal buildings that are pre - WW2 or even much older that could be adaptively reused to better purpose.

At 3:25 PM, Blogger Richard Layman said...

I've finally come to accept that the typical person who gets elected to a Council or as Mayor isn't typically a systems thinker, focused on structural change in a systematic way.

It's all about incrementalism.

WRT the Safeway area, it will be f*ed, with cheap looking modern architecture that isn't historically accurate.

The amount of development should trigger a special design-focused approval and coordination process, but we don't have such provisions within our building regulation and planning processes.

At least with areas in the Capitol Hill Historic District, but I am not sure if this area is included, there is an extra level of design review, but it doesn't necessarily ensure context-sensitive new construction buildings, because of how the Sec. of Interior guidelines are interpreted wrt new construction.

At 2:27 PM, Anonymous Anonymous said...

You're correct about elected officials, but then again those qualities are a bonus, rather than a core competency.

And the inverse is as true as well.

I've been thinking about NIMBYs for a while, and thinking there is a significant change in what "NIMBY's" are over a 30-40 year period.

Peter Navarro started out as a california NIMBY, which was you can't build a new development until the costs are accounted for by the developer. A lot of those things have been built into the sauce

A lot of the NIMBY complaints here are about light and sun access -- as well as appropriate design.

Likewise complaints about street parking -- very legitimate issues that are brushed aside.

Not sure on the literature here but would be interesting to look at.

At 9:14 AM, Blogger Richard Layman said...

there is a difference between no development and light and sun and design.

People do get belittled by the pro-growth sorts about light and sun.

And design.

With my foot in the middle -- I am pro-growth but also pro-preservation, pro-design -- I often end up writing arguments supporting the "place" issues vis a vis the pro growth contingent which rarely sees the value of "use values" within place.


I don't think parking deserves to be accorded primacy as long as providing the cost of virtually free parking on the streets "are not accounted for by the user."

The littlest girl next door is in her mine mine phase and it is much deeper than it ever was for her older sister, it extends to actions and actions by others, where for the first girl it was mostly about objects.

I think about the littlest running ahead of her sister, "me first, me first," and that is the argument about parking. "We were here already, it's our resource. You can't have any."

In the city, provided transit isn't substandard (admittedly this isn't the case now), for many people a car isn't their first choice for mobility. Given this reality, the reflexive view that lots of parking needs to be provided by new developments doesn't meet the reality, both in general and in terms of the habits, behaviors, and routines of multiunit tenants. E.g., in W4, I would hazard a guess that multiunit residents drive at half the rate of single family households.

In any case, you are absolutely right that it would be useful to have some research and subsequent literature on the topic.

The funny thing to me about parking is that the car users inadequately represent their interest when calling for massive amounts of parking. From the standpoint of "me first, me first," there is only so much capacity on the roads. In DC especially for the most part that capacity is fixed--it is impossible to expand it.

The more people who can be satisfied by walking, biking, transit use, and fractional car use, the more room there is on the streets for the car owners.

... and I do mean to write about the issue of car access and aging. Something I've become a bit more attuned to, having had Suzanne's parents here for a month over the holidays.

The more people who don't need to rely on cars leave space for the people that do have such needs.



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