Big box retailers already gone include Circuit City, bookseller Borders, Blockbuster and any record shop you can remember. Soon to join them may be Sears, electronics chain HH Gregg and office product leaders Office Depot or Staples, whose proposed merger was nixed by a judge on Tuesday. Sports Authority, which recently filed for bankruptcy, will soon auction properties.
Macy’s added to the concern this week, posting a 7.4 percent drop in first-quarter sales.
That could have long-term ramifications for metro Atlanta. Fewer shopping outlets means less tax revenue for county coffers, putting more strain on some communities whose tax bases have already degenerated because of depressed home values.
On average, big box retailers in metro Atlanta pay annually about $1 per square foot in real estate taxes, said John Bemis, executive vice president retail market lead for JLL, sometimes known as Jones Lang LaSalle.
How much they pay in sales taxes depends on revenue. For instance, a typical Macy’s store nationally can ring up on average between $15 million and $25 million in annual sales.
In some cases, an abandoned store can find a better suitor if it’s in a hot retail area, Bemis said.
“A Sears store in a quality location can be replaced quickly by a better performing retailer that can bring in more revenue,” he said.
That’s the rosy scenario.
Store closings have touched every area, from around North Point Mall in Alpharetta to parts of Clayton County and west to the Greenbriar community. Meanwhile, shopping destination Avalon has lured stores in power centers around North Point such as Crate & Barrel to move to there instead.
Metro Atlanta’s retail vacancy rate was 7 percent in the first quarter of 2016, according to retail analyst CoStar Group. The national retail vacancy rate was 5.6 percent in the first quarter of 2016.
Some retailers saw the writing on the wall. In the early days of the 2000s, Atlanta-based Home Depot was building new stores almost every 48 hours in a bid to tap into the nation’s housing boom and the easy credit from banks for new washing machines and hardwood floors. Today the company opens only a few stores a year, mostly in Mexico.
“We made a strategic shift several years ago from growing sales through new store openings to increasing revenue within our existing stores,” spokesman Stephen Holmes said.
Other chains buck the tide. Nebraska-based outdoor gear retailer Cabela’s said late last month that it plans to open a new 70,000-square-foot store in McDonough. The location, slated to open fall 2017, will be part of the new Jodeco Atlanta South development in Henry County off Exit 222 on Interstate 75.
Ryan McCullough, a senior real estate economist for CoStar, said Atlanta’s absorption of big box stores is better than the nation’s, despite the higher retail vacancy rate. The vacancy rate for big boxes metro Atlanta peaked at 11.4 percent in 2009, but is now at 3.7 percent. The U.S. vacancy rate for big boxes is 4.7 percent.
The problem is the vacancy absorption is not even, he said. Where retailers in the past used housing growth as a guide for expansion, they now only go to shopping centers with proven sales records.
Some chains have seen the vacancies as an opportunity. Gym giant L.A. Fitness took over a former Target store in Conyers and the old Tower Records in Buckhead. Grocer Aldi replaced an Office Depot in Peachtree City. A Circuit City in Duluth became a Studio Movie Grill.
But Chris Lemley, a marketing professor at Georgia State University, said the future for big box stores is hazy. The cost of housing so much inventory will make less sense as online continues to chip away at retail purchasing. That will put more pressure on store operators to trim unprofitable stores and add to the growing list of vacancies.
“They are just going to keep getting squeezed,” he said.