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AS BIG BOX STORES DECLINE, THE ENTERTAINMENT INDUSTRY IS DISCOVERING A GOLDMINE OF REAL ESTATE – THE PERFECT BACKDROP FOR THE FEC. By Sean Krainert he ebb and flow of the national economy and its sectors has recently revealed a prime landscape for FECs to flourish. For every deficit and downside in one industry, a door of opportunity opens in another. This natural evolution is directly tied to continual social changes and technological advances. Inside this big picture is the inevitable change in how retail is consumed and the reemergence of the experience economy as FECs take over former big box chain structures and mall spaces. As the source of major spending power for the retail economy transitions over to an online platform, its previous physical real estate is offering new value to the entertainment industry. For example, a consumer can purchase a pair of jeans in a physical store or on the Internet. The choice is dependent on preferences, but the end result is the same: they will have acquired a new pair of jeans. The driving power behind the FEC is that the experience it offers cannot be replaced by technology—rather, it can only enhance the experiences from within for the consumer.
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COVER STORY BIG BOX STORES: DECADES OF SUCCESS While big box stores are now notorious for news headlines highlighting their demise, they once had their time in the sun. When discount shopping emerged in 1962, three retail pioneers created a new way to shop: Wal-Mart, Target and Kmart. These enterprising retailers stepped up and made a move that would change retail shopping forever, opening up the decades-long era of big box stores and enclosed malls. Discounted prices were not the only way these behemoth stores cornered the suburban market. They marketed shopping at their stores as a family activity. At the time, these buildings averaged 50,000 square feet (compared to today’s average of 200,000 square feet). The sheer size of these stores overwhelmed and impressed, and Americans purchased what they thought was everything available under the sun—and, at the time, it was. Soon these stores became anchors in larger malls, benefiting the smaller retailers by their shiny attraction. For decades, this retail phenomenon didn’t have a hitch. That’s until technology took consumerism to an entirely different level, and social change embraced it.
REDEFINING THE MALL: ADAPTIVE REUSE FOR GHOST BOXES Big box stores draw their name from their typical architectural characteristics: free-standing, cuboid-shaped stores set in the middle of a sea of asphalt. When abandoned by closures,
Level 257 is a perfect example of an FEC moving into a big box location.
these structures became known as ghost boxes. According to The Fiscal Times, American retailers are going bankrupt at the fastest rate since the Great Recession for a number of reasons. And, as they lose relevance, there is a dramatic increase in commercial real estate coming to the market. For FECs, it’s a golden opportunity. “As retail continues to come under pressure from Amazon and other online resources, landlords of spaces that were historically out of reach for FECs will actually be looking to the entertainment industry to help fill a growing number of vacancies,” says Bill Diamond, president of Diamond Properties, a commercial real estate business. According to Julia Christensen, author of Big Box Reuse, the footprint of a big box store extends beyond the space occupied by the building or even the parking lot. In many cases, “roads are widened, stoplights put in... entire bypasses might be created. So all of this invested infrastructure remains after the retailer leaves the building behind.” The result is a great deal of embedded energy both in and around big boxes, which in turn also creates a strong incentive for adaptive reuse. Adaptive reuse refers to the process of reusing an old site or building for a purpose other than what it was built or designed for. And while FECs fit the bill perfectly to recreate use in these megastructures, they aren’t the only ones redefining these empty spaces. Other projects that have taken up residence in these ghost boxes include new libraries, schools, churches, gyms, and while still only in theory, developments including farming and rainwater and solar energy collection surrounded by efficient green housing. IBI
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COVER STORY This puts the entertainment industry, and FECs in particular, on the list of pioneering innovators creating pragmatic and successful developments that play a bigger role in the environment and economy. One of the main reasons behind their success is that the entertainment industry is unique and has thrived since its beginning, due to its ability to evolve with the times. While physical retailers are closing their doors left and right, the mall itself is not dying. Rather, these spaces are being redefined with the help of a spectrum of industries, Bill Diamond, commercial real estate including food, beverage, hospitality executive. and entertainment businesses. So, while anchor stores, and smaller ones as well, are dramatically decreasing in size, the ones that have remained are being revived by the presence of entertainment pacesetters, such as FECs.
MALLS’ TRANSFORMATION TO MIXEDUSE SPACES MIRRORS BOWLING’S TRANSITION INTO FECS When the traditional bowling center started a decline in its relevancy and appeared as an outdated source of entertainment, it was the FEC that emerged, offering consumers more than what bowling alone could. Since its booming emergence, the sport of bowling has become even more popularized with its presence among other features including destination dining, redemption arcades, escape rooms, music stages and more. Instead of these activities overshadowing bowling, they brought in the masses and gave bowling a front row seat in their line of attractions. The same can be said for what FECs in former big box stores can bring to the remaining retailers of these diminishing malls. According to JLL Retail, approximately 36 million square feet of vacant space is back on the market due to department store closings in 2017 alone. Instead of focusing on the unfortunate closings of retailers across the nation, the flipside is extremely exciting. The fact is that the space, which a successful retail mall once occupied, is still prime real estate, presenting ideal structures that are an exceptional stage for mixed-use developments.
THE EXPERIENCE ECONOMY One reason that FECs have the corner market in succeeding in these spaces is that they are based on the experience economy: a concept where businesses go beyond selling a product or service, and focus on the customer experience. A business may still be selling retail 40
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items or services, but they are showcased to the customer in a way that is enhanced, turning it into a memorable experience, rather than a simple purchase. The idea itself was pioneered by Mr. Walt Disney. He offered his guests an unparalleled experience, appealing to all of their senses. This initial defining creator of the experience economy, transforming financial transactions into personal experiences, is the cornerstone of thriving entertainment businesses today. Isn’t that what FECs are all about? You bet they are! As shopping for merchandise can easily be accomplished from the comfort of one’s home, visiting retail stores is no longer a desirable activity. According to an article in the Chicago Tribune, American’s shopping habits are changing as they shift spending to experiences, not stuff. As these consumers spend less on goods, and more on experiences, successful businesses are responding. Rather than merely selling products and services, they are upping the competition and selling their brand by presenting consumers with memorable, and unparalleled, experiences—the driving motivation behind all FECs. While they don’t need it any more for retail, consumers still love a one-stop shop—a good thing as FECs begin to step foot into these spaces of previous malls across America. Just as consumers of the past stepped into big box stores, consumers today know that when they walk into an FEC, they are guaranteed to find something they like. “Things are cyclical. Entertainment started out on main street, but as rents rose, the industry was forced to move to less expensive locations. But as the retail industry goes through a major change, entertainment will find itself being a sought-after tenant, whether for malls, strip centers, or even suburban office properties,” says Diamond. In the next issue of IBI, come back to find out about a number of thriving FECs that have taken residence within some of these ghost boxes across America. And they can tell you from experience—it’s an opportunity that shouldn’t be passed up. ❖
Sean Krainert is a freelance copywriter living in the San Francisco Bay Area specializing in real estate, hospitality and mental health writing. He is also an alumni of the Wichita State Shocker bowling program.