In smaller towns, empty storefronts and economic challenges loom large

  • The Opera House Professional Center sustained damage from a natural gas explosion in November 2016 and is still boarded up Tuesday, Aug. 22, in Canton, Ill. Erin Hooley/Chicago Tribune/TNS

  • Missy Towery, executive director of the Spoon River Partnership for Economic Development, is seen Aug. 23 in the main square of downtown Canton, Ill. The J.C. Penney store in the central Illinois city has closed, and officials have so far struck out in finding a retailer to replace the department store. Erin Hooley/Chicago Tribune/TNS

Chicago Tribune (TNS)
Sunday, September 10, 2017

CANTON, Ill. — When J.C. Penney announced plans to close up to 140 then-unnamed stores earlier this year, officials in the central Illinois city of Canton dashed off a letter urging the company to spare the department store that sat just off the leafy park in the town square.

It wasn’t just that the decades-old store and the shopping center it anchored had gotten a recent facelift, or that it seemed as much a part of the town as the murals depicting local history painted on one of its outside walls.

Canton was still recovering from a November natural gas explosion that killed one person and damaged more than 100 downtown businesses. And J.C. Penney — the only department store in Fulton County — drew shoppers and their gas, restaurant and sales tax dollars to the city of 14,700 about 30 miles southwest of Peoria.

It didn’t work. The store closed in July and its signs have since been taken down.

“That was the last place in town you could buy decent clothes. The only place left is Walmart,” said Kenneth Hamm, owner of Canton’s K&L Antiques shop.

Since the start of the year, U.S. retailers have announced 5,699 store closures, according to Fung Global Retail & Technology, driven by retail bankruptcies, cost-cutting moves and, for a growing number of department stores and big-box chains, decisions to invest in top-performing stores that fit their new strategies.

And when a Sears, J.C. Penney or Macy’s pulls out of small-town America, the same factors that sent those retailers packing can make the big vacant storefronts they leave behind challenging to fill.

“The sad part to me is the malls. Walmart and Menards opened stores in all those markets, and they already killed the downtown. Now if these boxes are going to close, what’s left?” said Meredith Oliver, managing director with Cushman & Wakefield’s Retail Services Group. “These communities will get horribly hurt from a revenue perspective with sales tax dollars.”

Real estate experts say the U.S. simply has too much space devoted to bricks-and-mortar retail. Stores that once were a good investment can wind up on the chopping block when retailers’ priorities change, he said.

“They don’t want to refurbish marginal stores, they want to put those dollars into e-commerce or their most profitable stores,” Oliver said.

J.C. Penney’s closings were tied to its decision to invest in stores “that offer the best expression of the J.C. Penney brand,” spokesman Joey Thomas said in an email.

Many smaller closing stores would have required “major capital investment,” he wrote. Others lacked space for departments J.C. Penney thinks will drive growth, such as in-store Sephora beauty shops and appliance showrooms, or infrastructure to handle online orders and same-day pickup.

Less-visible small-town stores in malls a retailer doesn’t have a broader relationship with also can feel easier to cut than higher-profile stores in regional malls owned by major mall operators, Oliver said.

And while a popular mall in a big, prosperous community might see a department store’s departure as an opportunity to bring in a more enticing tenant, the demographic factors that contribute to closures in smaller towns also can make retailers tougher to replace.

Canton officials have a wish list of retailers they’d like to see in the former J.C. Penney store, but efforts to woo them have struck out so far. Kent McDowell, the mayor, said he reached out to a connection at Men’s Wearhouse, but was told Canton was too small.

Attempts to interest Kohl’s, which is opening smaller stores elsewhere that are about the size of Canton’s roughly 36,000-square-foot J.C. Penney building, fell flat too.

“That type of retailer is looking for a certain population, median household income and traffic counts, and we just don’t have the traffic,” said Missy Towery, executive director of the Spoon River Partnership for Economic Development, a not-for-profit promoting development in the Canton area. The area’s lack of interstates and four-lane highways doesn’t help.

Peru, an even smaller city by population near Starved Rock State Park, is hoping easier access will help it maintain its status as a regional retail hub despite the loss of two department stores at the Peru Mall. J.C. Penney closed earlier this year and a Sears is expected to close by the end of the year.

Bob Vickrey, Peru’s economic development director, calls the city a “pocket of prosperity for retail” that has attracted retailers leaving smaller surrounding towns. Peru has a cluster of big-box and restaurant chains surrounding the mall and the crossroads of Interstate 80 and Illinois Route 251, including Target, Kohl’s, Walmart Supercenter, Home Depot, Buffalo Wild Wings and Olive Garden.

Earlier this year, Peru set a record for sales tax revenue in a 12-month period _ about $6 million, equating to roughly $600 million in total retail sales, said Finance Officer Justin Miller.

Miller and Vickrey attribute the growth to new openings, though most have come outside the enclosed mall, including a new Dollar General and Speedway gas station.

Still, the city is hedging its bets in case retailers one day deem Peru the smaller town to leave behind, Miller said.

“We play both ends of the spectrum pretty well,” he said. “We’re trying to do the best we can, in the city, from an economic development perspective, of understanding that we may one day need to be less reliant on retail sales tax and more reliant on reserves and other revenue streams.”

So what might fill those empty anchor stores?

A shuttered shopping mall in a town of just over 1,000 people outside Cleveland is reportedly set to become an 855,000-square-foot Amazon warehouse.

Officials in Peru said their mall isn’t going that route. Mall owner GK Development declined to discuss plans to replace the Sears and J.C. Penney but said it is exploring ways to “reinvigorate” the mall.

“The company is exploring many options to redevelop the shopping center and is confident that Peru Mall will continue to be a significant economic engine with a strong retail presence in the Illinois Valley,” spokeswoman Marianne Fasano said in an email.

Oversize vacant boxes could be divided to make it easier to bring in tenants seeking smaller spaces. In Peru, a Kmart that closed several years ago was redeveloped into space for multiple smaller stores, the last of which was recently claimed by Planet Fitness, Vickrey said.

Discount chains like T.J. Maxx, HomeGoods and Ross Dress for Less that have been growing in major markets eventually will need to look to smaller cities if they want to continue expanding, said Mark Hunter, managing director of retail asset services at real estate firm CBRE.

“We’re going to see them have an opportunity to go into smaller markets where there’s less competition and strike favorable economic deals,” he said.

Other communities will need to look beyond retail, potentially turning to urgent care centers, residential developments or data centers, Hunter said.

Those kinds of uses can provide jobs and services, and keep empty storefronts from turning into eyesores. But they’re not always the top choice for communities looking for sales tax revenue, support for other businesses and convenient shopping options.

“Whenever you lose a retailer, residents and community members have to find another place to purchase those goods. If they can’t, they drive outside, and sometimes think, ‘Well, I’m here, I’ll fill the gas tank and check out this other store,’” said Kim Pierce, director of the Macomb Area Economic Development Corp. “It does have a trickle-down effect.”