Commercial Real Estate and Commercial Leases and Real Estate & Retail

Movie-rental stores are next retail backfill opportunity

July 27, 2010

Vacant movie-rental stores are beginning to flood the retail real estate market here and elsewhere as the nation’s second-largest chain liquidates and industry goliath Blockbuster Video fights for its life.

Oregon-based Movie Gallery Inc. began liquidating this spring, the victim of a consumer shift toward mail-order and kiosk rentals. Movie Gallery had eight stores here, six of which operated under the name Hollywood Video. Blockbuster, based in Dallas, had 35 local stores, some of which have already closed even though Blockbuster has so far held off on filing bankruptcy.

In both cases, retail brokers are lining up deals to backfill the spaces, which tend to be free-standing stores ranging in size from 5,000 to 7,500 square feet.

Blockbuster is getting out of its leases when they come up for renewal, said Kyle Hughes, a broker for Veritas Realty LLC.

Blockbuster’s lease for one of those spaces, at 8360 E. 96th St. in Fishers, ended June 30. About two-thirds of the 6,000-square-foot space is already being retrofitted for a 21st Amendment Liquors. An electronics retailer is close to signing a lease for the balance of the space, said Hughes, who is representing the partnership that owns the building. The asking price for the space was $22 a square foot.

Hughes also is representing the owner of a 6,000-square-foot building at 5215 N. College Ave. that housed a Movie Gallery. A restaurant interested in that space will try to line up neighborhood support at a Tuesday meeting of the Meridian Kessler Neighborhood Association.

Potential users for vacated movie-rental stores run the gamut from restaurants to medical office users, said Mark Perlstein, a broker for Sitehawk Retail Real Estate.

“Blockbuster had great real estate,” Perlstein said.

The chain’s prime locations have been attractive to auto parts stores in small towns around the state, said Bill French, a retail specialist with Cassidy Turley.

The spaces are too small for value-oriented retailers, such as Dollar General stores, that have been snapping up space nationwide as they grow to meet demand from consumers who are watching their spending.

French and Perlstein said retailers that play into the consumer appetite for savings are among the most active in the retail real estate market these days.

The two brokers both worked on what is probably the largest deal in the Indianapolis market so far in 2010—K&G Fashion Superstore’s lease of 40,000 square feet at Castleton Crossing, a center at 82nd Street and Allisonville Road owned by Texas-based American National Insurance.

The store, which is moving there in August from a 30,000-square-foot space elsewhere in Castleton, will occupy a space vacated several years ago by Circuit City, the failed electronics retailer. Perlstein represented K&G in the deal and French represented the owner of the center.

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