What does Borders’ bankruptcy mean for South Florida retail?

Feb.February 23, 2011 02:25 PM

When high-profile, big-box retailers like Linens ‘n Things and Circuit City closed up shop, they left a huge hole in South Florida’s retail market.

While it took some time to fill up those spaces with new tenants, it may not take quite as long to fill up the 15 Borders stores across Florida — including two in South Florida — that will be vacant following the company’s bankruptcy filing last week.

“I think there will be some in-fill that will happen fairly readily with those locations,” said Bill Reichel, president and owner of West Palm Beach-based Reichel Realty, a real estate company.

The South Florida retail market has seen a rush of new companies, as out-of-state companies that had not previously considered South Florida, like retailer hhgregg, are giving it a look due to an affordability factor not existent in other markets.

“I think [companies] are definitely kicking their tires now, and I think they’ll look hard at [the former Borders] locations,” Reichel said. “There’ll be the opportunity for some new blood coming into our area.”

Of 15 Florida Borders stores, two are in the Fort Lauderdale area, and a number are concentrated in West Coast cities like Sarasota and Naples. Borders announced it would be closing 200 of its 500 stores nationwide as part of its reorganization.

Yesterday, Barnes & Noble announced it would consider taking over some of Borders’ locations throughout the country.

Barnes & Noble CFO Joe Lombardi confirmed to The Real Deal that the company was considering some of the Borders locations in Florida.

“With Borders having closed so many stores, there may be some markets we may be interested in potentially considering as a store location,” Lombardi said, but noted that  “there are very few of the 200 [Borders locations] that we were looking at.”

According to Chris Macke, senior real estate strategist at CoStar, the “very few” is key for Barnes & Noble.

“There will be a small number where it does make sense for Barnes & Noble to backfill the location, mostly because it will be a market or submarket that, for whatever reason, [Barnes & Noble] hadn’t penetrated yet,” Macke said. Many of the Borders locations would not work because “ these will be locations where there’s a reason Borders is closing them.”

The loss of the locations, though, could have another impact as bookstores tend to be especially desirable tenants, as they tend to attract more affluent customers.

“Bookstores are very valuable to retail centers — the ones that are going to lose their Borders, it is definitely going to hurt,” Macke said.

Given the customers that tend to frequent bookstores, many tenants in the same centers sign co-tenancy clauses, which say that if stores like Borders leave, their cotenants may as well.  

“You may have a domino effect,” he said.

Among the South Florida stores set to close are the location at the 25,000-square-foot 2240 East Sunrise Boulevard in Fort Lauderdale and the 24,822-square-foot location at 12171 West Sunrise Boulevard in Sunrise.

The Borders at East Sunrise is a standalone location, while the Plantation location is in a shopping center, the Plantation Crossing Center, which also has tenants such as CompUSA and art supply store Michael’s.

According to LoopNet, prior to the bankruptcy filing, all of Plantation Crossing’s 70,437 square feet were fully leased.

“The Borders boxes are kind of junior anchor spaces, and I don’t think it’s going to have that big of an impact,” Reichel said.

Macke also said that, given recent plans by hhgregg to expand in South Florida, it would likely be looking at some of the former Borders spots.

“Depending on the location, the submarket and the center and other tenants, hhgregg may decide some of these make sense, and others don’t,” he said. “I would imagine they’re at least going to look at them to make sure they’re not missing anything.”

Hhgregg could not be reached for comment.

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