The former Bank of America building at 1616 W. Market St. (Ron Campbell/Johnson City Press)
Announcements of new developments anchored by large-scale national chains are often met by fanfare from municipal leaders and excitement by residents, but not much consideration is given to what will be done with the buildings if the original tenants move on.
The buildings are thousands of square feet of floor space, and are often tailored to the specific needs of the company intended to take up residence inside, making them difficult to rent to other businesses.
Mitch Miller, CEO of the Washington County Economic Development Council, said he and his staff are currently marketing a few larger building that might fall into that category, each under different circumstances.
The former Bank of America building at 1616 W. Market St., could be an excellent location for office space tenants in a growing commercial area, and shouldn’t be a very difficult sell, Miller said.
“It’s a great office building, and I’m pretty confident that we’re going to see something move into there fairly quickly,” he said. “We’re starting to see a lot of fresh interest in that area with the new businesses coming in nearby, so that should go a long way in getting that space filled up.”
The three-story office building has been empty since the bank downsized its operations in the area and moved into smaller administrative space.
But much of the Center South Shopping Center at 1911-1919 S. Roan St., once anchored by a Kroger grocery store and a Kmart, has stood empty considerably longer.
The 51,000-square-foot of retail space, vacant for years, is currently being marketed by the Shopping Center Group to possible occupants, and Miller says it’s in good hands.
“I sat down personally with the owner — he’s out of New York — and had a pretty lengthy discussion with him,” Miller said. “It’s a pretty unique property, but when it hit a certain time in its lifespan, there were some needed improvements that have to be made. They’re starting to take those steps now, they’ve paved the parking lots and done some exterior cosmetic improvements.”
Because of the building’s age and the length of time it’s been empty, he said there are likely still some needed interior improvements to be done.
“What it comes down to are the folks who own the buildings,” he said. “We can try to help to find the right tenants and try to facilitate that deal, but it really comes down to the property owner, and apparently nothing has made sense to be a tenant there yet.”
Across town on North Roan Street, Miller said there may soon be activity at the former Lowe’s Home Improvement store after a bank foreclosed on the property a few months ago.
Miller said the retail space, which was most recently Fun Expedition, is now owned by Mountain 1st Bank & Trust.
“We haven’t been involved in it, but according to the bank, there’s been definite interest in that property,” he said. “Somebody’s going to find a heck of a deal on that property. The visibility’s not great, but they just put a new roof on the building to make it more attractive to people looking to lease it.”
One factor that may slow a deal with a new tenant, however, is Mountain 1st’s ongoing acquisition by Charlotte’s First Citizens Bank & Trust.
The $10 million deal will repay $8 million to the U.S. Treasury for the smaller bank’s Troubled Asset Relief Program bailout.
Miller said the trick to renting these properties and others like it is knowing how to juggle a variety of issues.
“You have to understand the market, try to find the tenant that’s going to be the right fit and stay in constant contact with the owners,” he said. “Sometimes it takes time to find the right company that fits in a specific space, but we’re always working on it.”
But Steb Hipple, professor of economics and a research associate at the College of Business and Technology’s Bureau of Business and Economic Research at East Tennessee State University, said finding new tenants for large big-box retail stores can be difficult.
“A large retail facility isn’t very useful for anything else,” Hipple said. “When they lose their primary tenants that were there when the buildings were first put up, it’s hard to find someone else.”
He said usually, the buildings aren’t owned by the retailers, but the developers who built them, who can be stuck with a 30-year mortgage on the specialized commercial space if the intended occupant leaves unexpectedly.
Sometimes, he said, retailers will also demand clauses in their contracts with developers specifying that a competing company can’t take up residence in the space in the event that the retailer decides to move.
“Right now there’s an oversupply of retail space in our market, and it’s being substantially expanded as more come on line,” he said. “What this means is there’s a significant possibility that some of these large projects will never be finished, because the developers won’t be able to offer rents that will pay for their own expenses.”
Hipple said the oversupply of retail space will pit building owners against each other in competition for tenants and drive rents down to rock-bottom levels.
Still, some former box stores have found new lessees.
The former Wal-Mart store on North Roan Street is now an AT&T call center, and Market Street Centre, previously occupied by a Winn-Dixie supermarket, was taken over by Mountain States Health Alliance as a Heart Association training center.
“It can be done,” Hipple said. “But it’s not very easy or cheap to find someone who needs that specific space or to alter it to fit somebody new.”