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Archive for Friday, February 1, 2008

Retail restraints lock out leases

February 1, 2008

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Zoning restrictions turn away tenants

Two buildings in one of the city's busiest shopping centers remain largely vacant nearly three years after the first shop moved in. Enlarge video

Two pieces of commercial property near the intersection of 31st and Iowa streets have had troubles finding tenants. The difficulties stem from restrictions that limit competition with neighboring Best Buy and Home Depot.

Two pieces of commercial property near the intersection of 31st and Iowa streets have had troubles finding tenants. The difficulties stem from restrictions that limit competition with neighboring Best Buy and Home Depot.

They just sit there - beckoning shoppers from perches in front of two of Lawrence's most popular stores, near one of the city's busiest retail streets, offering a chance for an opportunistic retailer or two or three or four to set up shop, poised to cash in.

Just don't be a tax service. Or a CD shop. Or a cell phone reseller or any of a number of other potential tenants for space in the two buildings near 31st and Iowa streets.

That's because the largely vacant buildings at 2000 and 2040 W. 31st St. are saddled with deed restrictions and zoning rulings that have made marketing the spaces just that much harder to lease during this, an already down time for retail real estate.

"We've had some challenges with the uses allowed there," conceded Pam Peterson, a retail specialist for Block & Co., the Kansas City, Mo.-based firm that is leasing the property.

Among them:

¢ Liberty Tax Service had been lined up to move in by January, but ultimately it was turned away - as an "office" use, it didn't qualify under the commercial zoning that had been approved by the city.

¢ An unnamed retailer of wireless phones had hoped to set up shop, but it was turned away because its products and services would compete with those at Best Buy.

¢ An entreaty from a retailer of compact discs and other entertainment media also was denied, because of no-compete clauses in the use agreement worked out among the center's existing tenants.

But don't look at Doug Dobbins. Nearly three years after he and his business partner secured the first leases signed for part of one of the two buildings, he's plenty frustrated with the relative lack of retail activity.

One tenant, a smaller UPS Store, has followed their lead.

"I signed up for a full shopping area," said Dobbins, co-owner of D3 Sports, which sells licensed Jayhawks, Chiefs and Royals apparel and collectibles. "Empty buildings aren't good for anything."

Getting some more neighbors certainly would help boost sales, he said.

He's answered dozens of questions from potential tenants, and seen dozens more drive up and peek inside the windows of the building next door, which today remains the same 12,000 square feet of unfinished space that has been around since D3 moved in next door back in June 2005.

He just wants some neighbors.

"We have a good average ticket," Dobbins said. "We just don't get enough people through the door. If we get another 10 people in the door, and make another five sales, that doesn't sound like a lot but it adds up over time."

Help may be on the way. Interest is picking up for the space, Peterson said, and she expects to secure a lease for part of the vacant space in the building now occupied in part by D3 and the UPS Store.

"It's a national restaurant chain," she said Thursday, describing it only as a "casual" concept without any other locations in Lawrence. "I should have a lease signed within a week."

Comments

compmd 6 years, 10 months ago

Jack, that's how I read it. You'd think they would just want to get people to the shopping center, but nooooo.

zettapixel 6 years, 10 months ago

There should be no non-compete clauses in a free market environment. If 5 businesses want to sell widgets and be right next to each other, then so be it. The store that sells widgets in the manner deemed most attractive to the consumer will win out. Don't be afraid of competition, embrace it!

jafs 6 years, 10 months ago

If you believe in a free market, there should be no non-compete leases.

Competition is the essence of free markets - without it they don't operate correctly.

As far as Wal-Mart, etc. go, there are laws about preventing monopolies which are not being enforced. These laws are, in fact, designed to support a competitive free market by preventing companies from getting so big that they cannot be competed with at all.

A free market is a brutally Darwinian thing - when it operates correctly, there will be a series of business failures.

redneckwoman 6 years, 10 months ago

I'm just waiting for Redlobster's to come to Lawrence. That wouldn't be "competing" with any other in the area let alone in town.

pomegranate 6 years, 10 months ago

Marion, I've always thought that rather than progressive, they should have been known as the "regressive" stooges.

zettapixel 6 years, 10 months ago

LOL bowhunter... I've never owned a business? That's the funniest thing I've heard all day! I come from a family of small business owners and have owned and operated my own businesses since 6th grade. I've got a BBA in management and an MBA in marketing. I think I know a thing or two about business. But thanks for making me laugh... made my day!

hipper_than_hip 6 years, 10 months ago

We've already got a hooters in Lawrence, except it goes by the name 23rd St Brewery.

Confrontation 6 years, 10 months ago

They need a woman's clothing store in there. None of this overpriced junk like they have on Mass Street. Take a look at small strip malls in Emporia, Newton, Junction City, etc., and you'll find the same stores thriving. A Fashion Bug, Cato, or something like that would make a killing. Of course, there may be some clause about not competing with TJ Maxx and Old Navy across the street.

Kathy Gates 6 years, 10 months ago

Sounds like a plan, Confrontation. How about a Dress Barn and a DSW while we're at it??

Don Zimmer 6 years, 10 months ago

Non compete clauses are thee norm with the stores that have bargaining power.

No one forced the developer to sign with HD and BB. They could have filled the HD and BB locations with numerous same uses which would have been economic suicide.

The CATOs and Fashion Bugs will not pay the rent that they are asking unless the developer gets desperate. And they usually want in front of WMT and Target because of the traffic they generate. HD and BB do not generate the type of return visits the discount and grocery stores do.

BigPrune 6 years, 10 months ago

What, no mention of the super high rent they want?

BigPrune 6 years, 10 months ago

No mention that the building is elevated 15 feet higher than the street?

lubyloo 6 years, 10 months ago

"It's a national restaurant chain," she said Thursday, describing it only as a "casual" concept without any other locations in Lawrence.

I heard a long time ago that a Noodles was going in there.

LittleMissFlea 6 years, 10 months ago

I'm going to have to go with Hooters, since they have a quarter page help wanted in the paper right now.

Sigmund 6 years, 10 months ago

zettapixel (Anonymous) says:"There should be no non-compete clauses in a free market environment."

Restrictive covenants are agreed to restrictions by the property owners themselves. They are operating in a "free market" in that no one can be coerced into agreeing to the terms and understand the impact to their property value. As example, Home Owner Associations where all the current owners agree to abide by a specific set of rules and those restrictions bind all future owners of the land.

Zoning, on the other hand, is simply imposed by the government. Many zoning restrictions reduce the current value of the property without any compensation to current or future owners. Some zoning laws are so restrictive they are considered a "taking."

been_there 6 years, 10 months ago

Lowe's tried to come to Lawrence but the city didn't let them. Wish we could have had a Lowe's instead of Home Despot (Jim Cramer's name for them) they are so much better. If I can I drive to Lowe's rather than going to HD.

Sigmund 6 years, 10 months ago

If existing space sits empty because the landlord agreed to too strict of terms because of one large tenant, then the landowner gets to pay real estate taxes on empty space that he would rather have rented. It is in the landowners interest to agree to as few restrictions as possible and still attract the major tenants. He might try a work a compromise, less restriction for a lower rent for instance. But in all of this, the City isn't involved in "protecting big business," it isn't involved at all.

Zoning is different. If Liberty Tax Service wants to ask the city to rezone or grant an exception it can. The City can act unilaterally, with a request or without a request, to change zoning. Generally it doesn't need the consent of private parties.

The problem with this article is it presents the issue as a single problem and doesn't sufficiently distinguish between these two different kinds of restrictions. It treats zoning and restrictive covenants as virtually the same thing when in reality they are two very different animals.

Don Zimmer 6 years, 10 months ago

JackRipper

It's calledd life, get over it.

no one forced the developers to make a concession with HD and BB.

those restriction made the leases with HD and BB possible and also made the smaller buildings harder to lease. the developers went into this with eyes wide open.

The city should have no say into who can lease in a project that meets all requirements.That decision should be left to the owners.

let the free market operate and not be micro managed by government.

BigPrune 6 years, 10 months ago

I will believe a restaurant leases a space when I see it open for business. I do not believe there is enough parking. As for the non-compete clauses they typically apply to property that is owned by the same entity, but probably carryover if a neighboring property is sold off if more than one piece of ground is owned by the same entity. It's called a deed restriction, and it has been used forever. It protects the first one in, so some competitor cannot buy or lease a piece of property later on, nearby, and run the first one in out of business or hurt their sales.

It's a no-brainer that a CD/DVD store cannot lease a space in front of a Best Buy, just as it is a no-brainer that a lawnmower/implement store could not lease space in front of Home Depot. As for the tax service, big deal. They're around the corner anyway.

Tanetti 6 years, 10 months ago

What I wouldn't give to have a DECENT secondhand children's clothing store in town. I can't believe Second Chance is the only one left, with its dirty, dark, dingy, outdated retail space and dirty, dingy clothes and toys/equipment. I thought Children's Orchard (before you start on it being a chain, it was a franchise) was moving from downtown to this office space 2 1/2 years ago but they never materialized. I am more than willing to drive to Olathe for the closest Children's Orchard rather than give the "garage sale" store, as another mom calls it, my money.

As for the restaurant that's supposed to come to this space, I can only hope it's a Sweet Tomatoes (unlikely) or a Souper Salad (even less likely).

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