An industrial tenant wasn’t the first choice to replace Kmart in the shopping center on North McCulloch Boulevard, but it was the most realistic option, according to one of the owners of the shopping center.
Rich Heine, co-owner of the Kmart plaza, said when he learned his shopping center was going to lose its largest tenant in February he hired a major real estate firm to try to attract another large retailer for the center. Heine said he and his partner fielded a call about every other week from various companies, including Trader Joes and Whole Foods, but couldn’t find any takers.
“We did have some preliminary interest but when they started doing the demographics — believe it or not — most of them wanted at least 250,000 people in the general area,” Heine said.
The owners also explored splitting the store into thirds to allow for smaller tenants, but there was still very little interest.
So when Premiere Manufacturing, Inc. CEO Ryan Busnardo inquired about potentially using the former Kmart building for an advanced manufacturing facility Heine said he felt it was the best option available for the shopping center as a whole.
“Unfortunately with retail, we have to think outside the box. That wasn’t what I wanted to do initially, but I am now excited about the opportunity that this company is bringing to Lake Havasu. The jobs that are going to be generated here are going to be unbelievable,” Heine said. “I certainly looked at other alternatives for this. I know this is a bit of a change for people who want retail in here. If we could have done something like that I would have gotten behind it. We just don’t have an opportunity to go in that direction. So I felt comfortable that this is the type of business that is going to be clean, and a benefit to this city.”
Heine said the Havasu Kmart was once the top performing store west of the Mississippi, but it has been slowly losing sales over the last few years.
Partnership for Economic Development CEO James Gray said retailers like Kmart closing their doors has become a nationwide trend and Havasu is no exception.
“This isn’t a happy story to tell, but this is a real story to tell,” Gray said. “Just in Lake Havasu City if you would add up what has happened at The Shops at Lake Havasu, (the former Kmart), and Hastings you are looking at close to 350,000 square feet of empty retail.”
Gray said small retailers are still successful in rural areas, particularly in stores between 5,000 and 7,500 square feet with one to four employees. But larger retailers have been undergoing a major shift in recent years, moving to smaller store fronts and increasing their online presence.
“Retail in their space is changing,” Gray said. “They are investing in the infrastructure to bring it to your door, not for you to come to their door.”
That change has resulted in even traditionally large retailers like Target moving to smaller and smaller stores. Gray used Target as an example, saying their largest new stores are now just 40,000 square feet and their most popular stores are just 6,000 square feet.
That would mean a new Target would require less than half of the 101,135 square foot building left vacant by Kmart.
At the meeting on Monday, one of the shopping center’s other tenants said he is worried that adding a manufacturer into the shopping center rather than a retailer will adversely affect his business, because such a company wouldn’t draw as many customers to the center.
“I know that you have 500 parking spots here where retail used to be,” Busnardo said in response. “I get it. My people will shop here and I will shop here. That is what I’ve got. That would be a concern for me as well, it is a valid concern. But you have a choice of the greater of two evils – leave it empty, or get something in here and make it real.”
Gray said the bottom line is that the shopping center as a whole greatly depends upon the old Kmart building being occupied.
“I look at this center financially as a whole,” Gray said. “Right now that is 580 parking spots in this building. If this building is not healthy, this is literally 85% of the whole financial future of this space.”