Orchard Supply shutdown brings pain — and opportunity?
Bay Area: Vacant store sites will haunt for now, but ...
SAN JOSE » The impending shutdown of all Orchard Supply Hardware stores and other high-profile retail collapses will bring short-term economic pain and challenges for the Bay Area — but also longer-term opportunities that could introduce a new crop of retailers hungry for choice sites in the region.
In the near term, dozens of vacant sites will haunt the retailing landscape in the Bay Area due to the separate closures of Orchard Supply and Toys ‘R Us, but the empty storefronts will likely also beckon to national merchants that have yet to set up shop in Northern California, realty brokerage executives said Wednesday.
“It’s a glass-half-full situation,” said John Cumbelich, chief executive officer of a Walnut Creekbased retail brokerage that bears his name. “You have two fleets of stores, between Orchard Supply and Toys ‘R Us, with sizes of 40,000 to 50,000 square feet, hitting the market at the same time.”
The effects of this jump in vacant stores could depend on how much time passes.
“Short-term, you will see a spike in retail vacancies,” Cumbelich said. “Longerterm, you will see a whole cohort of national brands that currently aren’t in Northern California, that don’t want to come West until they are able to get 10, 20, 30, 50 sites all at once.”
Those retailers might include Bob’s Furniture and TJX Cos.-owned Sierra Trading Post, according to Cumbelich.
“You have chains like TJ Maxx, Ross Stores, Marshall’s, Smart and Final, Best Buy or some grocery chains that could be looking at the Orchard Supply sites,” said David Taxin, a partner with San Josebased Meacham Oppenheimer, a retail real estate brokerage. “Some of the stores could be subdivided and get two tenants. But you could also see these
stores sitting around empty for a few years.”
Another trend that could favor finding new tenants for the soon-to-close Orchard Supply sites is the overall strength of the retail and economic scene in the Bay Area.
“We are still under-retailed in the Bay Area, and you also have some of the lowest vacancy rates for retail right now,” said Nick Goddard, a vice president at Colliers International, a commercial realty brokerage.
The Bay Area city likely to take the hardest hit from the Orchard Supply closures is San Jose, where six Orchard Supply stores operate. The East Bay also will be jolted by the loss of 10 of the doomed hardware retailer’s stores.
“It’s not going to be an overnight thing to find new tenants for dozens of stores,” Taxin said.
Orchard Supply operates roughly 30 stores in the nine-county Bay Area and adjacent Santa Cruz County, according to a review of the hardware retailer’s website.
“Most of these stores are in great locations,” said Edward Del Beccaro, a senior managing director and market leader for the East Bay and Silicon Valley offices of Transwestern, a commercial realty brokerage.
And the stores are in different configurations at their locations. Some Orchard Supply outlets are at the end of a shopping center, while others are in the
“Orchard ending its operations this year could make life a little easier for Google because they won’t have to deal with a tenant in there.” — Nick Goddard, a vice president at Colliers International, a commercial realty brokerage
center of the mall strip, and some are on standalone pads.
“It’s a case-by-case basis,” said Tom Nelson, a vice president who specializes in the retail market for Colliers. “Some are going to be real challenges.”
Other scenarios could be more straightforward, however.
“You have some stores where the building has enough separation where you could put in a different use such as multi-tenant residential projects,” Nelson said.
One example of a significantly different future use: In March, a Google-led development venture paid $39.6 million for a downtown San Jose Orchard Supply Hardware site that would become part of the search giant’s transit-oriented community of offices, stores, restaurants, homes and open spaces near the Diridon train station.
“Orchard ending its operations this year could make life a little easier for Google because they won’t have to deal with a tenant in there,” Goddard said.