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Big boxes vacant, but new tenants expected soon

HATTIESBURG — For the past decade or so if you blinked you missed a new commercial development in Hattiesburg, particularly along U.S. 98 West into Lamar County. But lately big box outlets in Hattiesburg have been falling like dominos.

The Hub City has been hit by a series of major store closings that have left the area with about 500,000 square feet of vacant primary commercial real estate. The announced closing of the Super K-Mart was the latest blow. Earlier closings include Albertson’s, Office Max, Service Merchandise, Heilig-Meyers, Jitney Jungle, Sack and Save and Delchamps.

Does that mean Hattiesburg was overbuilt? Did it get too competitive?

Not so, says Gray Swoope, president of the Area Development Partnership. Swoope points to the facts that the area still has a low unemployment rate and sales tax growth has remained steady.

“Unfortunately, we have been the victim of a lot of national shakeout in the retail industry,” Swoope said. “If the market was constricting you would see sales tax revenues dropping off. So the market is there. We certainly have been concerned about these closings. But at the same time I think it is just a cycle we’re going through, and I think we will see other retailers back in these empty spaces in a short time.”

Swoope said some of the national retailers that closed in Hattiesburg were doing good business, but perhaps didn’t have the profit margins that the national office wanted during a time of downsizing and consolidation. Factors such as distance to distribution centers and resulting transportation costs also played a role.

Interest in K-Mart

The K-Mart property is expected to be vacant for only a very short period of time considering the amount of interest that has been shown in leasing the space located at Interstate 59 and Hardy Street/U.S. 98.

Jim Turner, president of J. Ed Turner Company in Hattiesburg, agrees that corporate restructuring has played a major role in the large number of big box stores currently vacant in Hattiesburg. K-Mart, Service Merchandise and Heilig-Meyers have all declared bankruptcy. And the Albertson’s closed in Hattiesburg was one of more than 200 Albertson’s closed across the country.

“Usually when Albertson’s enters a market they have three stores,” Turner said. “They had two more planned for Hattiesburg and two more for the Gulf Coast area. They apparently never reached the volume in Gulfport at Crossroads or at Hattiesburg to substantiate their triggers to build new stores.”

Turner said that while there is a large amount of vacant prime commercial real estate at present, some people see that as a great opportunity.

“The Hattiesburg market overall is healthy,” Turner said. “People could pick up an excellent location in a good market. With the loss of Jitney Jungle and Delchamps, we don’t have many choices for grocery shopping. We have two small Sunflower stores, a small Winn Dixie, two Super Wal-Marts and a Sam’s. We are tremendously understored in supermarkets. Everybody hopes someone along the lines of Kroger or Safeway will come into the market with two or three stores to at least provide an alternative selection.”

Competing with Wal-Mart is believed to be a major factor in the store closings. There are Wal-Mart Supercenters both across from the Cloverleaf Mall and on U.S. 98 West. But, as Turner points out, the issue of competing with the popular retail giant is a factor in retail markets across the U.S. — not just in Hattiesburg.

Andy Stetelman, owner/broker, London & Stetelman Commercial Realtors, said he isn’t concerned about the number of big boxes available in Hattiesburg because of the amount of interest shown in the empty spaces.

Vacancies bring traffic

“All these vacant buildings have done nothing but call attention to Hattiesburg,” Stetelman said. “It has created more opportunities for us. For every building, there are two or three major retailers who are interested. There are a lot of lookers. We have had proposals on the K-Mart building. And the Service Merchandise building went on and off the market real fast. It has already been sold. Everything is being absorbed.”

It was just coincidence that the closings happened in such a short period of time, Stetelman said.

“We aren’t concerned,” he said. “If you have any more big boxes, pass them out. We feel like we are okay. Hattiesburg is fine. We are as busy as we have ever been. We are making up for a slow last quarter. We think a slow last quarter of 2001 created a busy first quarter of 2002. We are seeing the amount of activities we usually see in two quarters in one.”

Stetelman admits that the first impression coming into town, to see so many vacant stores, isn’t good. But he said once people learn more about the situation, they understand.

“K-Mart was having problems not just in Hattiesburg, but at most locations,” he said. “Albertson’s was cutting back in hundreds of locations and probably picked locations to close that were across from Wal-Mart, if I had to guess. Service Merchandise went bankrupt. So you can’t blame that on Hattiesburg. I think the market is real strong in a lot of ways. The demographics speak for themselves.”

Rates for commercial properties haven’t dipped, but Stetelman said there might be more room for negotiation in some instances.

Contact MBJ staff writer Becky Gillette at mullein@datasync.com or (228) 872-3457.

About Becky Gillette

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