Erie, Lafayette Nine Mile Corner Highlights Difficulty Replacing Anchor Tenants

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Over the past five years, many municipalities have witnessed what analysts dramatically call the “retail apocalypse”: the accelerated closure of brick-and-mortar stores as the U.S. economy increasingly shifts to the e-commerce.

Big box retailers – chain stores with large physical footprints – have been hit hard. According to an April report by international investment bank and financial services firm UBS Group AG, between 40,000 and 50,000 retail stores will close in the United States by 2026. E-commerce will grow by about 4 % per year to represent 25% of the total retail trade. Sales. Just under half of the closures will be big box stores, the report predicts.

Boulder County is no exception. The list of flagship stores that have closed in recent years in the region is long. In Boulder, the downtown Alfalfa grocery store and many tenants in the Diagonal Plaza mall in north Boulder. In Longmont, the Twin Peaks Mall. Louisville was particularly hard hit: Sam’s Club, Albertson’s and Kohl’s along the McCaslin Boulevard corridor, Lowe’s on Dillon Road, as well as the city’s own Alfalfa’s.

A sign outside the recently closed Lowe’s location near West Dillon Road in Louisville directs customers to the new Nine Mile Corner location. (Matthew Jonas/staff photographer)

These stores often serve as anchor tenants for malls, helping to draw consumers to surrounding businesses. A successful big-box anchor tenant can be a huge sales tax boon to a city or town. Losing one can mean losing tax revenue not only from the main store, but also from nearby retailers. And finding a replacement tenant for a big box building after the original anchor has moved out can be very difficult, often resulting in extended vacancies.

All of this means that municipalities will fight hard to hang on to successful flagship stores – and the revenue they bring.

“It comes down to 100% sales tax,” said Michael DePalma, vice president of commercial real estate brokerage firm SullivanHayes, based in Greenwood Village but with an office in Boulder. “Not just the income related to the anchor, but everything around it that is generated by the anchor. (When we leave), you have to prepare for the fallout. You have to be attentive to everything that happens around this business.

Now Lafayette is about to lose one of its main flagship stores – the King Soopers at the intersection of Baseline Road and US 287. It is likely to close with the opening of another King Soopers nearby in Erie, in the Nine Mile Corner development at the intersection of US 287 and Arapahoe Road.

If the Lafayette King Soopers closes when the new store opens in Nine Mile Corner, Lafayette officials will need to find a way to replace the sales tax revenue the store brings into the city coffers.  (Cliff Grassmick / Staff Photographer)
If the Lafayette King Soopers closes when the new store opens in Nine Mile Corner, Lafayette officials will need to find a way to replace the sales tax revenue the store brings into the city coffers. (Cliff Grassmick / Staff Photographer)

“It can be devastating because it’s a major corner in Lafayette,” said Vicki Trumbo, executive director of the Lafayette Chamber of Commerce. “The bad news is that this is a big grocery store at a major crossroads in a town of 30,000 people, and it will disappear.”

King Soopers officials did not return calls requesting plans for the Baseline Road location.

The controversial story of the Nine Mile Corner project shows how much municipalities value these types of stores and the sales tax revenue they bring in. The project is a public-private partnership between Erie, the city’s urban renewal authority and developer Evergreen Devco Inc., comprising residential and commercial properties on an approximately 48-acre site on the southeast corner of ‘Arapahoe Road and US 287. Its first tenant anchor, Lowe’s, held its grand opening on June 3. King Soopers is expected to open there in 2023.

The development was controversial from the start. In 2016, Lafayette sued Erie for condemning part of the Nine Mile Corner land through eminent domain and preventing the project from taking off. The case went all the way to the Colorado Supreme Court before the municipalities agreed to settle. As part of the settlement agreement, Lafayette will receive 50% of Nine Mile Corner’s sales tax revenue while paying 50% of incentive costs.

Lowe’s and King Soopers belong to what developers and municipalities consider two of the safest long-term big-box sectors: home improvement and grocery stores. As the economy shifts more toward big-box apparel e-commerce, general retailers and furniture stores have especially struggled.

On Wednesday, work continues at the Nine Mile Corner development in Erie.  Erie and Lafayette will equally share the sales tax revenue generated by tenants and the resulting incentive costs.  (Cliff Grassmick/staff photographer)
On Wednesday, work continues at the Nine Mile Corner development in Erie. Erie and Lafayette will equally share the sales tax revenue generated by tenants and the resulting incentive costs. (Cliff Grassmick/staff photographer)

Municipalities don’t have direct control over which tenants landlords find for their buildings, but cities can help developers attract the best possible tenants, said Julian Jacquin, Erie’s director of economic development.

“We can provide incentives for this project, either by completing work on the site or by providing assistance to the developer, which then allows them to promote and recruit new interests to the types of businesses we want” , said Jacquin.

That’s what Erie did for Nine Mile Corner, which landed the city Lowe’s and King Soopers.

“With the generation of e-commerce we find ourselves in, certain types of retail have changed,” Jacquin said. “Two of the most resilient usage types are still groceries and home improvement. These are two product types that are much more important to be able to experience in person.”

When King Soopers leaves Lafayette, the city will therefore have the challenge of not just filling that space, but filling it with a tenant who can adequately offset the lost sales tax revenue – even if the city receives 50% of the tax. sale of Nine Mile Corner, Trumbo said.

“We also need to generate the remaining 50%,” she added.

To make up for this difference, the city would need another tenant, or more tenants, to move into the US-released King Soopers 287 and Baseline, which is owned by King Soopers’ parent company, Kroger Co. However, that might be easier said than done. Many big-box flagship retailers are massive, custom-built buildings. Few tenants need the amount of space used by these stores. And many grocers place covenants on their buildings, preventing another grocer from moving in after they leave.

“That’s a tough size to fill,” Trumbo said. “Look at Louisville with all the big box stores from 30 years ago now empty. My concern is that (King Soopers) will become one of those really tough projects to fill and become an empty main corner.

Indeed, the former Kohl’s, Albertson’s and Lowe’s in Louisville all remain vacant. The old Sam’s Club in this town was taken over by Ascent Community Church. With around 1,000 people attending weekend services, the church is one of the few types of tenants to use space as large as big-box anchor buildings. The Flatirons Community Church in Lafayette found a similar arrangement when it moved into a former Albertson’s and Walmart in 2011.

While new developments like Nine Mile Corner in Erie often easily attract anchor tenants, municipalities can face several hurdles in attracting replacement anchor tenants.  Factors that can impede the reletting of big box space include most tenants not needing as much space as traditional anchor tenants and covenants put in place by the original tenant that limit the types of authorized replacement tenants.  (Cliff Grassmick/staff photographer)
While new developments like Nine Mile Corner in Erie often easily attract anchor tenants, municipalities can face several hurdles in attracting replacement anchor tenants. Factors that can impede the reletting of big box space include most tenants not needing as much space as traditional anchor tenants and covenants put in place by the original tenant that limit the types of authorized replacement tenants. (Cliff Grassmick/staff photographer)

Another option would be to subdivide the building so that it can be occupied by several tenants. This is the approach taken with the former Alfalfa’s in downtown Boulder, which is being converted into a four-unit shopping center with retail, offices and a medical clinic.

DePalma said that might be the likeliest outcome for the Baseline Road King Soopers.

“I think it’s splitting,” he said. “It could be split in half or almost in half and be a good size for a number of different people. 25,000 to 30,000 square feet is a good size for a gym or a discount retailer like Ross or TJ Maxx. Thrift stores are also popular right now.

Trumbo agreed that the King Soopers subdivision is a viable option.

“I think everything could be on the table,” Trumbo said. “I just don’t think another single user is going to walk into such a large space. I hope the city will consider multiple users.

For such a large building that must provide a high amount of sales tax, completing it must be one of the city’s top economic development priorities, she said.

“I’m just crossing my fingers that it doesn’t become what we envision,” Trumbo said.

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