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LI retail vacancy rise has shopping centers looking for new, diverse tenants 

But even in the landscape of big bankruptcies and closings, prime locations can still be hard to find.

Retail vacancies have risen on Long Island, as

Retail vacancies have risen on Long Island, as here at Sayville Plaza, amid bankruptices and closings across the country in the past few years. Photo Credit: Daniel Goodrich

Arcade-restaurant venue Dave & Buster’s set up shop in part of a former Walmart space in Massapequa in May. 

Planet Fitness moved into part of a former Waldbaum’s supermarket in Greenlawn in November. 

Discount retailer Burlington is headed to a former Toys R Us/Babies R Us store in Commack late this year.

Local malls and shopping centers are increasingly seeking to fill vacancies with tenants that aren’t susceptible to online competition, such as medical offices, gyms, restaurants and other entertainment options, as well as off-price stores, including Burlington and Marshalls, which are faring well as shoppers’ demand for bargains grows. 

The bankruptcies and closings of several national retailers in recent years, including Toys R Us, Sears and Mattress Firm, have pushed up Long Island’s retail vacancy rate, especially at shopping centers that had big box anchors. 

The vacancy rate at Long Island shopping centers between 10,000 and 350,000 square feet rose above 7 percent in the second and third quarters of 2018, up from 6.7 percent in both quarters a year earlier, according to data from Manhattan real estate information company Reis Inc. The second-quarter vacancy rate of 7.3 percent was the highest for that period in 18 years. 

“The area has seen larger fluctuations in vacancy and rent growth [both positive and negative] over the past two years when compared to the nation," said Reis economic analyst Cody Bond. "The second quarter of 2018 was particularly challenging, consistent with the closings of Toys R Us and some Sears stores."

The picture could be worse, were it not for the area’s high demand for retail, and the ability of its mall and shopping center managers to pull in new, diverse tenants, local real estate experts said.

In fact, prime retail locations can still be hard to find on Long Island. “On a macro level, yes, there is certainly more anchor space available in certain markets, but real estate in our business is a location business. So, for the best location, for the right intersection, they’re still very hard to get,” said Joshua Weinkranz, president of the Northern region for Kimco Realty Corp., based in New Hyde Park. 

The local area wasn’t hit as hard as other parts of the country by the so-called retail apocalypse in 2017 and 2018, when an unprecedented number of stores closed due to online competition. The  vacancy rate at U.S. shopping centers was 10.2 percent in the third quarter, the highest since the same period four years ago, according to Reis. 

But Long Island felt some pain as well. In 2018 alone:  

  • Sears Holdings Corp., which filed for Chapter 11 bankruptcy protection in October, had several rounds of closings last year, including three Sears stores in Garden City, New Hyde Park and Hicksville, and three Kmarts in West Babylon, Riverhead and Huntington.
  • Bed Bath & Beyond closed two stores in Inwood and South Huntington in November, after saying in July that it would close about 40 stores nationwide if it couldn’t negotiate more favorable leases.
  • Mattress Firm, which filed for Chapter 11 bankruptcy protection in October, closed two locations, in Plainview and Oceanside.
  • Fortunoff Mattress closed two stores, in Carle Place and Huntington, in September, only a few months after opening them.
  • Leonardo Furniture in Westbury and Casco Kids Furniture in Centereach closed in the fall, which their owners blamed in part on competition from online retailers.
  • Toys R Us closed its 12 Long Island stores, some of which were combined with Babies R Us locations, after the bankrupt retailer called it quits for all of its approximately 700 stores.

Retail store occupancy on Long Island "is still heavier and denser than other markets across the country. But we’re facing challenges,” said Greg Batista, a broker at Ripco Real Estate Co. in Jericho.

Long Island has seen little new retail construction in recent years, which has helped keep its vacancy rate from rising too quickly, Bond said.

Retailers seeking to expand on Long Island or enter the market here face significant barriers, including high property taxes, strict zoning laws that vary by municipality, and higher-priced square footage than in other regions, said Kenneth R. Schuckman, president of Schuckman Realty Inc. in Lake Success.  

So rising vacancy rates that push rents down are providing opportunities for retailers that had trouble breaking into business on Long Island in the past, he said.

Schuckman handles the marketing for the former Sears store in New Hyde Park.  Interest in the store space is in high because Western Nassau County is densely populated and there is no new construction, he said.  

“Before that store closed, we already had a tenant,” said Schuckman, who said he couldn’t disclose the name of Sears’ replacement yet.  The 120,000-square-foot space will be subdivided among two to three tenants, he said.

Before its demise last summer, Toys R Us Inc. had 12 stores here and a nearly 20 percent market share for toy sales on Long Island, compared to 12 percent nationwide, according to retail analyst Marshal Cohen of NPD Group, market researchers in Port Washington.

And most of those locations remain vacant, in part because big-box spaces are more difficult to fill in the current retail climate, experts said.  

“I would say in general it’s just because retailers don’t want to be at larger spaces. So the days of the 60,000- to 100,000-square-foot, super big-box tenants … there are few of those [opening] today,” Kimco's Weinkranz said.  

Target, for example, opened a small-format store — 52,000 square feet — in a former King Kullen grocery in Selden in November. Target’s full-size stores have averaged about 130,000 square feet.

“Target historically wanted very large stores, but they could never find space in that market. Now they have a smaller format … where they could pick up some of the large-market share,” Weinkranz said. 

In May, Dave & Buster’s opened in 36,680 square feet of a former two-level Walmart, which was 130,000 square feet, at the Westfield Sunrise Mall in Massapequa. A Raymour & Flanigan furniture store will take the rest of the remaining space when it opens on the second floor, beside Dave & Buster’s, in 35,000 square feet of space in February.

The former Walmart's lower level was leased to Dick’s Sporting Goods in April 2017.

Also, set for a spring opening in Commack, a Whole Foods will take 45,000 square feet of a former King Kullen grocery store space, which was 60,000 square feet, in Veterans Memorial Plaza, which is owned by Kimco.  In the same shopping center, a Burlington is set to open in late 2019 in about 40,000 square feet of a former Toys R Us/Babies R Us store that was about 63,000 square feet.

And though landlords and real estate managers are willing to subdivide larger spaces for several small tenants, it often is not the preferred route because of the added cost of construction work and splitting utility services, said Michael Mattone, chief financial officer for Mattone Group, a real estate firm in College Point, Queens.

The firm’s Roosevelt Raceway Center in Westbury includes a 50,000-square-foot former Babies R Us store that closed in the fall after 23 years on the property.

Given the turnover rate of retailers now, landlords are getting pickier.  

Target on Feb. 5 will close a 143,000-square-foot store in the Commack South shopping center that it is leasing from Cosentino Realty Group, which is scrutinizing the next tenant for more than just the ability to pay the rent in the bustling retail area near Crooked Hill Road.

“We’re turning users away. They weren’t what we were looking for," because they would have been in conflict with the Walmart, Kohl’s, Costco or ShopRite in the shopping center, said John Baker, vice president of construction and development at Cosentino in Commack.

Years ago, retailers hated to see gyms as their neighbors in shopping centers because there was a perception that gym customers worked out and went home without shopping, Weinkranz said.

“Today people walk around, work out … it’s trendy to be in workout clothes all the time. It’s trendy to be healthy and fit,” he said.  

Recent gym openings include two Planet Fitness locations — one opened in December in Selden, where it replaced a gym that closed two years ago, and one opened in November in Greenlawn, where it took 33 percent of the space remaining from a closed Waldbaum's.

A 24-Hour Fitness opened in December in Carman’s Plaza in Massapequa, replacing a HomeGoods that relocated to nearby Westfield Sunrise Mall.

In March, a Blink Fitness location opened in a former Sears Hardware space that had been vacant for five years in a Lindenhurst shopping center.

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