Small, local retailers help fill empty mall storefronts

What do a trendy clothing store, decorative glass maker and gourmet-burger business all have in common? Small and locally owned, they're using the recession as an opportunity to expand.

While a bad economy has caused many large, national chains to close stores or delay opening new stores, some retailers are able to set up shop in places where several years ago they might have been turned away.

Before the recession, shopping centers had few available sites. And when space opened up, it tended to go to well-known chains with deeper pockets than most mom-and-pops, say real-estate experts. But now, those experts say, landlords are turning to local retailers to fill a growing number of empty storefronts as the recession drags on.

"As long as they're financially stable and seem to have a good business plan, they probably have a shot," said Susie Detmer, a real-estate broker focused on the retail sector for Cushman & Wakefield in Seattle. "Many landlords are receptive to the possibility of adding a new, local concept to their mix."

Vivian Ahn and Amy Kang, both originally from Seoul, South Korea, opened a moderately priced women's clothing store called JuJubes (pronounced like the candy drops) next to H&M at Southcenter mall in Tukwila last summer after testing their concept for a year at Seattle's Northgate Mall. They introduced a second location last week at Tacoma Mall and hope to have a third by the middle of next year.

"A few years ago, I tried getting into Bellevue Square. But the economy was good, and they had no spaces for me," Kang said. "Then about three months ago, I was shopping at Bellevue Square, and I noticed a lot of empty spaces."

After she contacted the mall, its leasing office suggested a couple of openings, which "unfortunately didn't work out," Kang said. "The space was too small, and the lease terms too short. I'm still hopeful. If it's too late for this holiday season, maybe next spring."

A new report by Cushman & Wakefield shows the vacancy rate for investment-grade shopping centers in the Puget Sound region hit 6.8 percent after the first half of 2009. That's more than double the 3.1 percent vacancy rate of a year ago. The report notes that big-box centers were especially hard-hit earlier this year when Circuit City and Joe's Sports closed all of their stores.

"Historically, we've had less vacancy than demand. And that has changed," Detmer said. "For the first time in a long time, tenants have a choice of multiple spaces, as opposed to a take-it-or-leave-it situation."

To fill empty storefronts, landlords are lowering rental rates or forgoing them altogether for an introductory period, agreeing to more flexible lease terms and helping with a new tenant's build-out costs, Detmer said. Still, landlords continue to turn away prospective tenants if they lack retail experience or a solid business plan, she said.

"They don't want to see serial closures in any given space," for fear that it would be branded a bad location, she said.

Glassybaby, which makes decorative colored-glass cups in Seattle's Madrona neighborhood, opened two locations this year — one at University Village and the other on Main Street in downtown Bellevue. Glassybaby did so only after testing its concept in temporary, nearby locations, said Chief Executive Steve Heuring.

Glassybaby is encouraged that sales of its $40 glass cups are even with last year, Heuring said. Now, it's considering opening a store in New York City, where rising vacancies have caused a sharp drop in rental rates, he said.

"We're being quoted rents that are half of what they were a year or two ago," he said. "I think it's very strange for the developers and building owners to have such a buyer's market. You usually don't see that in New York."

In June, former Eddie Bauer executive David Makuen created BuiltBurger, a gourmet-burger delivery service, with his wife, Rebecca. They started it as an Internet business, but to build local brand awareness, they opened a temporary location this month at Pulp Lab in Ballard.

They also are considering temporary locations in other Seattle neighborhoods, Makuen said, adding that many landlords today are "open-minded and creative."

"There are many, many more landlords interested in short-term lease agreements than before the recession," he said. "You still pay fair-market rent, but without the onus of a three- or five-year lease."

— Amy Martinez

Tidbits

PCC Farmland Trust will host its free annual farm tour at Ames Creek Farm in Carnation on Sept. 26 from 10 a.m. to 4:30 p.m. as part of the King County Harvest Celebration Farm Tour. It will include samples and cooking demonstrations, live music and other activities. The nonprofit trust bought the 178-acre farm in 2006, and it grows crops and raises chickens, pigs, turkeys and cows.

Drop-ins are welcome at the farm, 27411 N.E. 100th St. in Carnation. For directions, call 206-547-9855 or visit PCCFarmlandTrust.org.

— MA

Whole Foods plans to open its Interbay store Oct. 14, about nine months after developer TRF Pacific settled a legal dispute with the high-end grocery chain.

Whole Foods' West Seattle store is still expected to open late next year, according to spokeswoman Vicki Foley. That site has become known as "Hole Foods" by the West Seattle Blog and others because of behind-the-scenes development turmoil that has left a giant hole in the ground where the store is expected.

— MA

Seattle-based Bartell Drugs opens a store in Mill Creek on Monday, marking its 56th location. The 14,960-square-foot store is at 18001 Bothell-Everett Highway and follows another opening by Bartell last month in Lynnwood.

— AM

— MA

Retail Report appears Fridays. Melissa Allison covers the food and beverage industry. She can be reached at 206-464-3312 or mallison@seattletimes.com. Amy Martinez covers goods, services and online retail. She can be reached at 206-464-2923 or amartinez@seattletimes.com