SHELLS OF THE STORES THEY ONCE WERE: RETURNING VACANT RETAIL PROPERTY TO PRODUCTIVE USE IN THE MIDST OF THE 'RETAIL APOCALYPSE'.

Author:Fitzgerald-Mumford, Mairead J.
 
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  1. INTRODUCTION AND BACKGROUND

    In the first quarter of 2017, nine major retailers--as many as in all of 2016--declared bankruptcy, sparking widespread concern that America was in the midst of a "retail apocalypse." (1) The United States has been overstored for decades, (2) but the issue reached a tipping point last year, when retail chains announced almost 7000 store closings. (3) The trend continued in 2018, with over 3800 store closures announced in the first quarter alone. (4) Although there may be uncertainty surrounding what the future of the retail industry will look like, one thing is clear: the communities from which retailers are departing will bear the burden of the shells that have been left behind.

    1. The Greyfield Problem

      The vacant retail properties that are the central focus of this Note include former malls, strip malls, anchor stores, and "big box stores." (5) These empty structures go by many names: "ghostboxes," (6) "greyfields," (7) retail "shells," (8) and "dark stores," (9) to name a few. The reasons for these vacancies are myriad, but not mysterious: retail chains regularly make the decision to close underperforming store locations; (10) companies go bankrupt; (11) or--most infuriatingly for many residents--companies leave a perfectly fine store empty and, like a hermit crab, move into another slighdy larger store just down the road. (12) The structures often remain empty for years, and they are hard to miss. (13) They were "gut-wrenchingly ugly" (14) to begin with, and the faded outlines of neon signs and empty parking lots littered with plastic-bag tumbleweed quickly turn ghostboxes into depressing eyesores.

      Appearance aside, these vacant stores pose serious problems for the public's health, safety, and welfare. They are magnets for crime, particularly arson, theft, drug crimes, and vandalism. (15) Although there is an argument that the distance between such stores and suburban and rural residential areas mitigates the danger to neighbors, the fact remains that ghostboxes make communities less safe and put a burden on municipal services. After a retail shell is vacated, municipalities must often spend "additional public money" for "greater police service to monitor the property, greater fire services due to the likelihood of fires in abandoned structures, and the provision of cosmetic improvements meant to make the property look occupied." (16) Indeed, retail shells "disproportionately affect these public safety costs" compared to vacant residential properties. (17) One study of vacant and abandoned properties revealed that "[although commercial properties make up only 3 percent of Oklahoma City's vacancies, they account for approximately 40 percent of all police and fire calls." (18)

      The greatest threat that ghostboxes pose to communities is economic in nature. Municipalities compete to attract businesses, often investing millions of taxpayer dollars in constructing infrastructure and providing subsidies and tax breaks. (19) When major retailers exit so-called "anchor stores" that support smaller businesses in malls, strip malls, and shopping centers, the decrease in foot traffic harms smaller businesses. (20) The longer these stores remain vacant--and it usually is a long vacancy, since it is notoriously difficult to find new ghostbox occupants (21)--the greater the chance that an entire retail plaza will go dark. (22) Communities have long recognized that even standalone retail shells can cause devastating economic disinvestment in the area. As a spokeswoman for one Pennsylvania township, which spent in excess of eight million dollars to purchase a former Bon-Ton department store, said: "The site is highly visible... and a long-term vacancy could have a detrimental effect on [the township's] economic image and tax base." (23)

    2. Scope

      This Note intends to address responses to retail vacancies by local governments in nonurban areas where land is relatively cheap and low-density development predominates. Its purpose is to assist these municipalities in motivating owners of vacant retail structures to return the property to productive use, thereby significantly reducing the number of empty retail shells that litter the landscapes of many communities. Alternatively, in cases where the owner is unable or unwilling to mitigate the negative externalities imposed on the community by a vacant retail structure, I propose solutions tailored to commercial properties (24) that will allow local governments to intervene in ways that will have the least amount of impact on strained municipal budgets.

      My intention is to suggest a typology for categorizing retail property vacancies and to identify a few methods that local governments may employ to reduce the length of time during which such properties remain vacant. In proposing that local governments begin the analysis of vacant building situations with a determination of the highest and best use of the property, my aim is to provide a use-neutral framework, not to promote certain land uses over others. (25) Furthermore, this Note encourages communities not to overlook temporary or unconventional uses for spaces, such as pop-up stores or seasonal stores, which can provide relief even when the prospects of full reoccupation are bleak. In the words of Professor Schindler: "Nearly any use would be more economically beneficial to a municipality and its residents than an abandoned property." (26) Every community is different, and this Note encourages local governments to tailor any method to the unique present and future needs of the communities that they serve.

      The menu of potential remedies contained herein is by no means exhaustive. As the voluminous body of literature regarding abandoned urban and residential properties suggests, there is ample room for creativity in this area of the law. (27) Furthermore, the range of solutions available depends on the specifics of the interaction between state and local law. (28) The options that this Note recommends intentionally represent the path of least resistance--conservative approaches that can be deployed by the shrinking or underresourced municipalities, which struggle most severely with abandoned retail real estate issues. The methods geared toward these communities are well established, relatively low cost, and unlikely to invite litigation by corporations who have far greater resources than most municipalities can dedicate to a protracted legal battle. Communities with more resources to dedicate to eliminating vacant retail property are encouraged to use this limited menu as a jumping-off point to pioneer innovative solutions and to use the full reach of local power available to them.

  2. ANALYSIS AND SOLUTIONS

    1. Analytical Framework: A Postabandonment Approach

      As already established, retail property owners' failure to put their properties to productive use imposes negative externalities and costs on the surrounding community. (29) Once a retailer has vacated a store, the goal should be to minimize the amount of time that the structure remains unoccupied and unproductive.

      The solutions proposed in much of the existing vacant-property literature cannot be adopted wholesale into a suburban or rural context. (30) In major cities, demand for property is high, and land is a scarce commodity. (31) In those communities, land use planning is focused on channeling development. Outside of urban centers, however, the opposite problem exists: municipalities with sprawling, undeveloped land engage in cutthroat competition to attract development and the economic opportunities that come with it. (32)

      Local governments, particularly those in suburban and rural areas, are frequently underresourced as it is. The best solution in these communities is the one that requires the least amount of investment by the municipality. Rather than taking on the expensive, time- and resource-consuming task of identifying and bringing in a new occupant--what I refer to as a proactive approach--local governments should allow the market to do the heavy lifting whenever possible. In most cases, this does not mean that local governments should take a passive approach, sitting by and waiting for the problem to work itself out--the ubiquity of greyfields speaks loudly to the inefficacy of such tactics. Instead, municipalities must take what I call a market-anticipatory approach: they must first identify the path of least resistance by which a new tenant will take over the structure, and then take steps to remove barriers that would slow down or prevent such a transaction.

      The first step in the market-anticipatory approach is to determine the marketability of the building in question by identifying the highest-value use of the property (33) and then assessing the suitability of the existing structure to that use. This step is diagnostic rather than prescriptive: the highest-value use is highly contextual and will depend largely on the likely economic return on a particular use of the parcel, offset by negative externalities (34) imposed on the community by that use. In some cases, the highest-value use will match the existing use: retail. (35) In other cases, it may be nonretail commercial development (e.g., incubator spaces, offices, or warehouses). (36) In severe cases, the highest-value use will not be commercial. Shrinking municipalities often do not have the demand for goods, services, or housing to support commercial use of all previously developed land. (37) Population changes--particularly in aging rural communities (38)--may call for different use distributions than were previously planned, or unanticipated settlement patterns may have cut the property off from high-traffic areas. The use may not have been suited to the location in the first place. (39)

      Whatever the highest-value use of the land may be, municipalities must then make an objective determination of the suitability of the structure, as it now stands, to...

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