Friday, April 27, 2018

New trend puts busy markets in unused commercial space

The Yuma Indoor Marketplace started in an old Mervyn’s location, and a phase two expansion is now planned for an old Target site.

In Arkansas, it used to be a car dealership. In Missouri, it was a Kmart. In Michigan, a factory. In Ohio, two different outlet malls. In California, a Sam’s Club. And in Arizona, a retail big-box store. All these commercial real estate locations shared a common destiny last year — all opened as big indoor retail markets in 2010, hosting large numbers of vendors in what would otherwise have been unused space.

Michael Unger, the chief operating officer at the Value Fair Market, says that low rents on empty commercial real estate buildings make this a time of opportunity. “As long as the rates are what they are, and as long as you have big-box retailers going out of business, I think it will continue, because the properties are available at deep discounts.”

The real estate mover and shaker behind the Value Fair Market, entrepreneur Alan Cohen, told the North Jersey Record that the marketplace concept could put old unused properties back in business. He says that this business model gives vendors low rents and a low-risk place to sell merchandise, with no store construction costs.

Value Fair opened in a former New Jersey department store about a year ago. An inside location in a big-box-like venue offers several advantages, from facilities and parking to security to a more upscale cachet. “We don’t call ourselves a flea market,” says Unger. “We’re an indoor outlet market.”

Matt Mertens, who turned a vacant Sam’s Club in California into a new retail venue this year, agrees. ShopSmart, he says, is “ a cross between a mini-mall and an indoor marketplace.” The opportunities for sellers are huge, he says: “We provide a place where entrepreneurs can start or expand their business in a low-risk low-overhead environment.”

Workers put up the new sign at the Value Fair market.

Chris Hahs, owner of the Grand Slam Market Place in Missouri, calls his former Kmart a “flea market mall.” He says the location offers some significant advantages over other local venues, including air conditioning, heating, and the presence of a professional management team on site seven days a week. “Because we were originally a Kmart,” says Hahs, “we have 10 acres of parking, great access, and a great location.”

Fredrick Morris, project manager of the Marketplace of the Americas, oversaw the conversion of an entire outlet mall site into a market with over 200 vendors, larger retail stores, an eight-screen movie theater, a food court, and more. He sounds a note of caution: “If you’ve already got an existing building, it is cheaper in this economy to convert it to a market than to build a new one. It is very expensive to convert a building, though.” He says that it costs at least $2,000 per booth to do it right, built out of steel, with security doors, slot-wall construction, and electricity. Not only is the cost high, but banks will not make loans for this kind of business, so developers need to be able to write checks right away.

Still, for the right market owner with the right situation, “you’re providing a chance for a bunch of small business owners to have a great place,” Morris says. “Our place was a closed-up mall. Now it is booming. We’re doing over 7,000 people coming through on a weekend, and we’ve only been open for nine weeks.”

The larger real estate markets are not showing many signs of vitality, but that means opportunities for property owners who see creative ways to put underutilized space to work. Low-cost and plentiful open commercial space means that more multi-vendor markets are likely to be starting up in spaces that used to hold big-box retailers and larger businesses in 2011.

Photo credits, with thanks: Value Fair Market, Google Maps.

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