Discounters fill space left by closed stores

The hulking shells of former big box stores, victims of the economic downturn and the rise in online retailing, have quietly started filling up with commerce again.

The spaces formerly occupied by retail heavyweights including Circuit City, Linens 'n Things and Borders are now welcoming sellers of discounted designer jeans, used video games and surplus merchandise. Many of these new stores moving in trumpet terms such as "off-price," "discount" and "value" in their slogans.

This shift in the bricks-and-mortar shopping landscape is bringing a different vibe to shopping hubs across the metro area, even in the relatively upscale environs of Chesterfield.

Stores including Big Lots, Ross Dress for Less, Jo-Ann Fabrics and Nordstrom Rack are among the wave of retailers capitalizing on lower rents, the new frugality of shoppers and the struggle of mainstream retailers to retain consumers fleeing to better deals online.

With a business model that's better protected from online rivals — selling items too cheap to be shipped cost-effectively — discount retailers are expected to be a resilient player.

"These days, I think everybody is a discount shopper," said Tim Lowe, vice president of leasing for THF Realty, which owns and operates the sprawling Chesterfield Commons.

Until recently, the last new major tenant in Chesterfield Commons was a Dick's Sporting Goods, built in 2007. But last month, a 23,000 square-foot Big Lots opened in the strip's former Circuit City store. A new Gordman's and an Aldi grocery are being built nearby and are slated to open this fall.

And the other gaping hole at the Commons — the empty Linens 'n Things — was also recently claimed by Ross Dress for Less, which is entering the St. Louis market for the first time. The store has an opening date set for March of next year.

"We didn't want to put just anybody in," Lowe said. "We pursued Ross. We knew they were coming into St. Louis. And we wanted to expand our apparel offerings."

Ross Dress for Less, an off-priced retailer similar to T.J. Maxx, also has signed a lease to open a new store next year in the shuttered Linens 'n Things in Fairview Heights. The opening date has not yet been announced.

The store chain has been on a growth spurt of late and is making inroads in the Midwest. In 2008, the California-based company had 838 stores nationwide. But by the end of May, it had 998 stores, impressive growth given the country's jobless recovery.

driving a bargain

A major catalyst to the changing retail landscape has been attractive leasing deals.

"These sites have been sitting empty for a couple of years, and so they are pretty cheap," said Sherif Mityas, a partner in the retail practice of the consulting firm A.T. Kearney. "So from a retail perspective, you can get sizable real estate at a pretty good discount."

Big Lots now has 13 stores in the St. Louis region, having opened two stores recently in the vacant Circuit City stores in Chesterfield and Fenton. Nationwide, it rolled out 80 new stores last year and plans to open 90 more this year.

The affordability of prime real estate has driven much of that growth, said Toni Fink, a company spokeswoman.

"We've been able to take advantage of a lot of empty Circuit Cities and empty World Markets," she said. "And so we've been able to get into nicer spots in more-upscale shopping centers."

The moves make sense, too, because more of Big Lots' customers seem to be coming from higher income levels. The stores have seen many "new faces" in the aisles in the last couple of years, Fink said.

The extreme discounters should remain strong even if economic conditions improve, retail experts say. Big Lots, for instance, thrived in the boom years before the recession hit, noted Martin Sneider, an adjunct retailing professor at Washington University. And it doesn't have the same sort of challenges as some of the other recent bricks-and-mortar casualties.

In selling bigger ticket items such as electronics, Circuit City and Ultimate Electronics competed against the 'sweet spot in what the Internet can offer," Sneider said.

But online retailers have proved less of a force in selling basic, cheap commodities, he said. What's more, many of these discount stores inspire foot traffic because their merchandise changes fairly quickly depending on whatever surplus goods it comes upon.

"There's a treasure hunt aspect to it," Sneider said. "You never know what you're going to find."

moving in

Five of the seven area Circuit City stores, which closed in the early part of 2009, now have new tenants.

"I would say there has been a surge of activity in the last six to eight months," said Joe Ciapciak, managing director of broker services for Pace Properties.

A recent CoStar report showed that the retail vacancy in the St. Louis region dropped to 7.9 percent in the first quarter of this year — the lowest it has been since the third quarter of 2008. The rate was as high as 9 percent in the first quarter of 2010.

Average retail rents also have dropped over the last year, the report showed.

But plenty of empty big boxes remain. Four of the six Linens 'n Things locations remain vacant.

These stores that have had a harder time finding renters tend to be in either less desirable locations or have peculiar attributes, Ciapciak said. For example, people are always asking him about the empty Linens 'n Things next to the St. Louis Galleria, which would seem to be a coveted spot.

"But it is basically a three-story building, and retailers don't do that anymore," Ciapciak said.

The liquidations this year of three area Borders stores and four Ultimate Electronics stores have added hundreds of thousands more square feet to the availability list, not to mention the pending closure of four American TV stores.

Still, the vacancies appear to be filling more quickly. Ciapciak said he had already received several offers for the empty Borders store in Ballwin, as well as at the Ultimate Electronics stores in St. Peters and Fairview Heights. So he expects to fill them soon.

"There are better deals to be had and more competition for them," he said. "Retailers are coming to the conclusion that the window may be closing."

The two other Borders stores have already been snapped up by Joplin-based Vintage Stock, which is putting "Bam!" superstores into them. They sell and trade new and used music, movies and video games. The store at Chesterfield Mall opened Friday, and the one at Mid Rivers Mall is expected to open later this summer.

Rodney Spriggs, chief executive of Vintage Stock, had been eyeing those locations for a while. He contacted the malls within a day of the announcement that Borders would close those stores. He had a deal signed within 30 days.

His business has grown — sales were up 7 percent last year — which he attributes in part to the low prices his stores offer on new as well as used products.

"As times get tougher, people are trading in more of their products," he said. "If money is a little tight, we're the alternative, because you don't have to pay cash for what you want to buy."