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Prospects bright for Borders replacements

July 26, 2011
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Borders closed its store in downtown Indianapolis last year. (IBJ file photo)

Former big-box locations for Linens & Things, Circuit City and Cub Foods remained vacant for years and in a few instances continue to languish on the local real estate market.

So the liquidation of bookstore chain Borders Group Inc., which will dump another three big-box retail spaces onto a local market with three other vacant Borders stores, seems pretty ominous.

But local commercial real estate brokers say replacing Borders won't be as cumbersome since the chain carefully chose its real estate, opting for locations near concentrations of affluent and educated consumers. At least four of the six Borders locations should be strong enough to quickly land a replacement or replacements, and the outlook for the other two isn't shabby, either.

The Borders stores at Castleton Square Mall in Indianapolis and Hamilton Town Center in Noblesville (both of which are set to close as part of the Michigan-based chain's liquidation) sit at the front door of successful malls, the River Crossing store (already closed) is next door to The Fashion Mall at Keystone, and the former downtown Borders stands at the prime corner of Washington and Meridian streets.

The stores range in size from about 23,000 square feet to 33,000 square feet.

"They're some of the best retail positions in the city," said Bryan Chandler, principal at locally based Eclipse Real Estate. "These are all competitive environments, and there will be users for these boxes."

Borders stores in Greenwood and Carmel could take a little longer to fill since they sit outside the epicenter of their respective trade areas, but the spaces remains viable based on demographics and visibility, said Connie Niessink, a principal at locally based Niessink Commercial Real Estate.

The Greenwood store sits at U.S. 31 and Shelby Street, and the Carmel store is at Keystone Avenue and 116th Street across from Merchants' Square.

"I always hate to see any retailer go out of business because it reduces competition in the category," Niessink said. "On the other hand, because development has slowed, quality real estate is not abundant in Indianapolis. Whenever a retailer leaves a quality box behind, it's a great opportunity for somebody else."

Among the retailers expected to consider the Borders spaces are Dick's Sporting Goods, Best Buy and Books-A-Million, said John Bemis, the director of leasing at Chicago-based Jones Lang LaSalle, in an interview with Bloomberg News.

Dick's already has stores at Castleton Square and Hamilton Town Center, and Best Buy has a store adjacent to Castleton Square. Alabama-based Books-A-Million has just one local store, at Traders Point.

Bookstore competitor Barnes & Noble also may look to upgrade its real estate.

The liquidators that bought the remains of Borders plan to auction off the company's remaining leases later this summer or early in the fall.

Buyers would essentially sublease the space and continue paying rent to landlords. Borders had rejected the leases for stores it already closed, putting landlords back in control of the real estate.

The rationale for bidding, locally at least, likely would boil down to controlling the real estate, since Borders was paying market or higher rents, said Niessink.

She said Simon Property Group, which manages Castleton Square and Hamilton Town Center, would be watching the auction closely.

"For these boxes, for the most part, it's just a matter of time," Niessink said. "Good quality retail space in Indianapolis has never had a hard time leasing back up."

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