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Originally published July 9, 2011 at 9:34 PM | Page modified July 10, 2011 at 2:21 PM

New types of tenants helping fill big-box vacancies

Keith Magnuson is waiting for the multicolored climbing walls to arrive from Bulgaria — the crowning touch for his new 22,000-square-foot Stone Gardens climbing gym and fitness center at the Crossroads Bellevue mall.

Seattle Times business reporter

In the wake of big-box bankruptcies

Circuit City Stores: The consumer-electronics retailer left more than 18 million square feet of vacant space in 2009 when it closed all 567 U.S. stores, including 12 in Washington.

Borders: The bookstore chain filed for Chapter 11 bankruptcy in February and announced it would close a third of its 642 stores. In May it added to that list, bringing the Washington locations to four.

Linens 'n Things: The home décor and textile retailer closed 11 locations in Washington in 2008 after declaring bankruptcy. Ross Dress for Less took over its Redmond and Woodinville locations this year.

Source: Colliers International, Borders.com, Linensnthings.com, Seattle Times staff

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Keith Magnuson is waiting for the multicolored climbing walls to arrive from Bulgaria — the crowning touch for his new 22,000-square-foot Stone Gardens climbing gym and fitness center at the Crossroads Bellevue mall.

It may be the region's largest climbing club when it opens this fall, but the Seattle company's second facility will only fill half of the hole that was left at Crossroads after electronics retailer Circuit City fell into bankruptcy in 2009.

"This was exactly what I had been looking for," Magnuson said. "It's a great big giant box."

Like many local shopping centers, Crossroads lost some of its largest tenants when the economy plunged into recession. Nationwide, the bankruptcies of retailers like Borders, Circuit City and Linens 'n Things quickly translated into big-box vacancies, helping push up the nation's retail-vacancy rate by more than half.

Big-box stores, occupying upward of 25,000 square feet, often serve as crucial magnets for foot traffic at shopping centers. But once empty, they can take a long time to fill.

Now shopping centers are filling some of those big spaces in different ways — health and fitness centers, grocers, discount retailers and sporting good stores.

Take the former Kmart store at Kelsey Creek Center in Bellevue, for example. The 106,000-square-foot location, which has been vacant for nearly a decade, is now preparing for an unidentified health club and grocer to take over in the fall.

Landlords are ready to bargain after watching the nation's overall retail-vacancy rate rise from 6.8 percent in 2008 to 11 percent last year, representing more than 400 million square feet of newly empty space, according to a Colliers International report.

Elizabeth Best, real-estate broker with Seattle Pacific Realty, said owners have made concessions, such as lowering the lease rates for those empty boxes, and retailers are taking advantage.

"New doors are already open and retailers are signing up on most Linens 'n Things, Circuit City and Borders Books locations," she said..

One such tenant is health-club chain LA Fitness. Last year, it took 55,000 square feet of space in Kent and a 30,000-square-foot space across from the Southcenter Mall in Tukwila.

Grocers have been on the prowl for prime Circuit City locations that match their requirements in terms of size and demographics. She said Whole Foods is driving demand in high-income markets, while Trader Joe's is seeking out locations such as the former Circuit City in Silverdale.

"It's sort of like there is a grocery-store battle going on right now for the space," she said.

Discount and value retailers Ross Dress for Less, Nordstrom Rack, Marshalls and Big Lots are also refashioning big-box spaces.

At the Landing in Renton, the wealth of empty space was initially envisioned for traditional warehouse stores, said Bob Baker, a principal of the center's developer, Harvest Partners. But after the recession it found high demand from value-oriented retailers looking to go big.

"People are money conscious," he said, so discounters "are now responding to consumer demands by going after larger box spaces."

Marshalls was the first of the discount breed to join the mix of anchor stores at the Landing, taking 26,000 square feet of space.

In similar fashion, Ross recently leased two former Linens 'n Things spaces in Woodinville and Redmond.

Borders Bookstore's four vacant Washington locations have also been getting a lot of attention from discounters, said Susie Detmer, senior director at Cushman & Wakefield. But the two-level arrangement of its stores present a challenge, she said. And those that are free-standing are even more problematic, she added, unless they are in a downtown.

"Most Borders have fabulous locations," Detmer said. "But most people just don't want a two-level store."

Specialty retailers that hung tough through the recession are also taking over some anchor spaces.

The most recent: Dick's Sporting Goods and Sports Authority.

Pennsylvania-based Dick's Sporting Goods last year joined the lineup of retailers at South Hill Mall in Puyallup, leasing space previously occupied by a connected Linens 'n Things and Circuit City. This spring, it moved into Joe's Sporting Goods' former 56,000-square-foot location at the Landing.

Though some big-box holes are filling up, there are still shopping centers feeling the sting of recession.

Mark Anderson, senior vice president at Colliers International in Bellevue, said that from Tacoma to Lynnwood, there are properties that have been vacant for three-plus years.

"For these big boxes to be re-rented, landlords need to get creative," he said.

That's what Sher Properties has done at Crossroads Bellevue for Stone Gardens: It raised the roof to 40 feet, from 23, to accommodate those Bulgarian climbing walls.

"This is what this space needed — something for moms, dads, birthday parties and young kids,"said Magnuson, who aims to open next fall. "What's better than a place to climb?"

Christine Harvey: 206-464-3263 or charvey@seattletimes.com

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