New Walmart raises questions about future of Ypsilanti Township store
Watching the new Walmart Superstore open in Pittsfield Township this week raises plenty of questions about the future of the existing Ypsilanti Township store.
The new store is newer, bigger and boasts higher traffic counts in road data. And, since it also sells a full line of groceries, it’s able to fulfill more of the average Walmart customer’s shopping list. That means there’s a likelihood the new store will cannibalize the company’s existing customer base in Washtenaw County.
The new location on Michigan Avenue at State Road is also less than six miles from the Ypsilanti Township store, which opened in the early 1990s amid just as much concern and neighbor opposition as we saw in more recent years near Saline.
Township officials recently told me that they haven’t heard a word from either Walmart or the owner of the shopping center it anchors, Roundtree Plaza, about the future of the big-box location. Corporate officials didn't return calls.
And there’s nothing in the listings of either shopping center owner Centro Properties - a multibillion-dollar Australian based real estate investment trust - or Walmart Realty that suggest the Ypsilanti Township store space is available as a pending vacancy or sublease.
Michael Lippitt, a commercial real estate broker with retail specialists Landmark Commercial Real Estate in Farmington Hills, said it’s not uncommon across the U.S. for Walmart to upgrade locations within a few miles and maintain operations of both stores.
“They’ve done that a lot,” he said.
But what if the Ypsilanti Township store did close?
Walmart’s store-siting strategy has given the world’s largest retailer a real estate-based profit center.
As it’s been explained to me over the years: Walmart signs a deal for its big-box footprint, ranging from 100,000 to 200,000 square feet.
The lease deal for that space is both long-term, giving the store control over the space for a decades, and cheap - reflecting the value that Walmart will bring to neighboring, higher-priced stores that typically are developed nearby. Sometimes that means the store developer is building in a nearby strip center with top-of-market rental rates; other times, Walmart holds the land and sells outlots priced for the traffic count that it generates.
So if Walmart is controlling the real estate, it could - in an up market - sublet its space for significantly more than it pays in base rent.
But this isn’t an up market, particularly in Michigan.
Still, Lippitt said, he’s seen many former Walmarts and other big boxes find new tenants.
“You don’t see them sit vacant for that long,” he said.
Around Michigan, stores like Elder-Beerman, Hobby Lobby and Garden Ridge are examples; some smaller stores ask to subdivide the big box space. Then there are non-retail users: Churches, schools, training centers, indoor recreation facilities, are all options, Lippitt said.
But in the Ann Arbor-Ypsilanti area, we’ve got more examples of vacant big boxes - or “junior boxes” - than we’re used to: Former stores of Farmer Jack, Circuit City and Linens N Things still wait new incarnations.
In some locations - and not necessarily those sites - leasing rates in Ann Arbor are still higher than the market will bear, meaning spaces sit longer.
“Ann Arbor is tough right now … in terms of new leasing,” Lippitt said.
Which comes back to the Walmart real estate philosophy, and how if the chain truly is cutting grossly under-market deals, it then can afford to list any vacancies for under-market rates and still make money.
So that, too, is a hopeful sign for Ypsilanti Township if news breaks in the future that Walmart will depart Roundtree.
The more pressing question for Roundtree may be: Just how is the shopping center performing?
The empty storefronts are obvious.
On other fronts, it’s hard to tell. I’ve looked over a couple of recent public filings for Centro, a troubled real estate investment trust that has grouped its holdings into syndicates The filings pull out data on some of its malls in the United States., but none in Michigan.
Centro acquired the center - along with Maple Village on the west side of Ann Arbor - in its 2007, $3.5 billion acquisition of New Plan Excel Realty Trust. And with that acquisition, precise data on its Michigan portfolio appears to have gone into hiding.
Some signs exist: Like the company Web site, which points out that the 201,227-square-foot center has over 52,000 square feet available for lease - including a 36,000-square-foot former grocery store. That rate is about 26 percent - not a healthy percentage for most shopping center owners, especially if they’ve been highly leveraged based on a higher occupancy.
In comparison, the nearly 300,000-square-foot Maple Village is 15 percent leased.
Neither of the properties have published asking rates.
Meanwhile, Centro’s U.S. holdings have dropped from 419 to 394 in the past year, and their collective value has dropped from $6.1 billion to $4.17 billion.
Ypsilanti Township’s assessed value for Roundtree Plaza - with Walmart - is about $3.5 million, giving it an estimated market value of about $7 million. That’s $35 per square foot.
No matter what numbers are available - and no matter how you dice them - Walmart watchers will have some indicators about whether the Ypsilanti Township store will survive: For most of us, the best tools will be news - good or bad - about Centro; increasing vacancies in the Roundtree Plaza (because stores won’t stay or pay top dollar if Walmart isn’t driving shopping traffic.)
And there's still the most simple measure: How many cars are in the parking lot.
Paula Gardner is the business news director of AnnArbor.com, where she covers real estate and development.
Comments
thedime
Fri, Oct 16, 2009 : 4:26 p.m.
Super Walmart in Saline + Super Walmart in Belleville = No Walmart in Ypsilanti
missy
Thu, Oct 15, 2009 : 5:44 p.m.
I went to the new one today. The parking lot was full. The store is nice and clean, so I spent. LOL I did see many Saline folks but also lots of people not from Saline, since I live here, you can't go to Busches without networking....not sure that will happen at Walmart. Growing up in the South...I happen to love Walmarts so am happy it is here. But, I only went to the Ypsi Walmart a few times as it was just not your typical Walmart with friendly staff etc. Today at Saline Walmart, everyone was friendly and helpful and the store is clean. I had to ask them to order Mrs. B's Bisquits because that was why I went.
mirunner26.1
Thu, Oct 15, 2009 : 12:32 p.m.
I'm excited to see a SuperWalmart in the area. They built one in Canton and one recently went up east of Monroe (Frenchtown). I hope it does well. I plan on using the new one in Saline.
Salineman
Thu, Oct 15, 2009 : 11:39 a.m.
I went to the new Walmart yesterday and was very impressed with all the selection. It was funny as many Saline folks I know who swore up and down and all around somehow found there way inside the store. Makes you go hmmmm. I saw one Saline family grocery shopping and another buying a new lcd tv. I have no longer need ACO and never had a need for Busches. The lawn care aisles alone will keep me from needed to go to Lowes again for lawn needs.
Skeet
Thu, Oct 15, 2009 : 10:51 a.m.
I don't want to drive to Belleville or Saline. If they upgraded the Ellsworth store it would be a good idea. Just clean up the store a little bit, and put some brighter lights in there.
mom23
Thu, Oct 15, 2009 : 10:48 a.m.
It was my understanding that Costco voluntarily pulled out of the Zeeb Road area in response to local residents' concern. Unlike our new Walmart which plowed ahead with their plans despite resident concerns. That is why I drive to Brighton to go to Costco, where they pay a decent wage and provide benefits while still providing great service in a cleaner store. And why, despite being a stone's throw from Walmart, I will never set foot in that store! There is a lot of research out there about Walmart's business practices, they will get AATA to run service to the store and they will close Ypsilanti. If you think they care enough about the local residents that currently walk to Ypsi, you have mistaken a greedy corporation for one that cares about local residents -- their treatment of our concerns here in Saline shows they couldn't care less about residents near their stores
Tom Bower
Thu, Oct 15, 2009 : 9:58 a.m.
The Ypsilanti Wal-Mart store will close once Wal-Mart determines it is no longer profitable to keep it open. They invested a lot of money in the new Saline store and the road improvements around the store. It will be interesting to see what happens to stores like Busch's and ACO in Saline.
JAM
Thu, Oct 15, 2009 : 9:56 a.m.
In the little historic town I used to live in, the battle over whether or not to Walmart turned friends into enemies. City water/sewer had to be expanded, the land had to be annexed, etc., etc. Walmart got its way... less than 10 years later, they built a Superthing a mile away and abandoned the thing they built in the first place, which now sits empty and ugly. They also promised all kinds of civic beneficence, which never materialized. I don't set foot in one of those places unless I absolutely, absolutely have to (which is maybe one every 5 years).
An
Thu, Oct 15, 2009 : 9:34 a.m.
1. The Ypsilanti store can be reached by bus, I don't believe the Saline store can. 2. There is also a WalMart where Wonderland Mall used to be in Livonia. That would also serve Wayne County, no? I think there is also one in Taylor. Seems there are a few in Wayne County...Belleville is also in Wayne County... For me the Saline store is close to my job...so I will probably shop at that store, but I have been driving to the Ypsilanti store for years to get my insulin (they have a brand that is made by Novalin...it's called Relion...since I lost my job (in Saline...by a company who got tax abatements) I don't have insurance and thus pay for my insulin out of pocket...so the Relion brand, about 45% less than the name brand, saves my butt.) Anyhow, there's room for both stores.
jns131
Thu, Oct 15, 2009 : 9:16 a.m.
Canton just opened up its super WalMart as well. I think it was this week. So Wayne and Washtenaw counties both will have their own. I do agree though, the Ypsilanti WalMart will close. That one has always been filthy, lacked customer service and you could never find anything. We will visit this new one in Washtenaw and in Canton. After being up north where Super WalMarts abound, I am so glad to have one in this neck of the woods. Time to give that over priced Krogers on Whittiker a run for its money.
mrk
Thu, Oct 15, 2009 : 8:50 a.m.
I think that Hewitt + Ellsworth Ypsi store is probably pretty necessary to the folks who live around there. Personally, I'm not wild about shopping there -- not just for political reasons but because it doesn't feel safe and clean to me (although recently the interior has improved... from my observations the one time I visited in the last 6 months). Maybe it's that plaza in general... that vacant spot where Busch's used to be is straight-up creepy. Why is it that every time I go there are adult men outside Walmart selling candy bars for some non-profit organization... except they have no signs or explanation of what the non-profit does? I would think Walmart would take issue with that. Perhaps that contributes to my feeling of insecurity.
zollar
Thu, Oct 15, 2009 : 8:46 a.m.
Put in a CosCo to compete with Walmart. They almost put one in on Zeed Rd but the township shot them down.A perfect location.Freeway access,etc and for the folks who don't like Walmar,(Sams Club)....they can shop there.
whodat
Thu, Oct 15, 2009 : 8:45 a.m.
Here's one problem. While a building in a community's downtown has lasting value, and can be re-used for virtually anything, these big box stores are constructed cheaply and are really only good for one thing...big box retail. And you just can't put a new chain store in an existing vacant one, because all of these big boxes have their own "unique" floor designs and won't tailor their floor plans to meet those of the vacant property, especially if they can find land nearby to build. Even after they abandon a site for a new location many of these large retailers have clauses in their lease that bar the owner from renting the store to a competitor, often times even opting to pay rent on the vacant building. The building then remains vacant and vandalism and crime will most likely increase. As of 2005 Wal-Mart had over 300 vacant properties in the US as a result of them discarding their first phase of stores in order to build supercenters containing grocery stores. Many of these store sit vacant for years, and like I stated above become a hotbed for vandalism resulting in lower property values. Unfortunately, Wal-Mart incurs no penalty for this, the burden falls on the local property owners and tax payers. www.bigboxswindle.com
IheartYpsi
Thu, Oct 15, 2009 : 8:29 a.m.
I've heard that the Ypsi Walmart is among the top 3% for sales in the country. Even if that store loses some traffic to Saline, seems like it would still be quite profitable.
American Family
Thu, Oct 15, 2009 : 8:27 a.m.
I think that there is enough of a customer base to keep both stores open. The older Ypsilanti Township store will service the people closer and more East of its location. People within walking distance. The newer Ypsilanti Township store will cater to the people in its local area, and more north and West of its location. Both stores could tailor their stores to service their local people a little better now. That is a plus. Six miles is a long way if you are on foot, or ride a bike most of the time. I shop at both stores. Both are rather nice places, and well kept.