Empty big-box stores drag down their neighbors

Large vacant stores cast their shadows on empty parking lots. Several shopping carts lie on their sides.
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Shopping carts lie overturned in the abandoned parking lo...Dublin's retail blues (Todd Trumbull / The Chronicle)Rachelle Forest and her brother Bret Lowder walk through.

The retail area in Dublin near the 580 and 680 freeways looks like it's halfway to becoming a ghost town.

A slumping economy has transformed part of this city, where Mervyns, Circuit City and Expo Design Center have all closed recently, into an extreme example of the malaise affecting shopping centers across the Bay Area.

The retail exodus is forcing some cities to scramble in the face of lost sales tax revenue at a time when money is already tight. Meanwhile, they're grappling with how to resurrect the zombie neighborhoods, where many of the remaining merchants complain about declining foot traffic and the eyesores of buildings plastered with "for lease" signs.

"It feels abandoned and lonely," said Rachelle Forrest, assistant manager at the Floor Store, a flooring shop in Dublin that is encircled by shuttered businesses.

Dublin, a relatively prosperous East Bay community of 47,000, has long been a retailing hub. During the most recent boom, Dublin added several new shopping centers on its outskirts, supplementing older strip malls downtown. As the economy soured, that older core, along Dublin Boulevard and San Ramon Boulevard, started to empty out.

The victims are a who's who of failed and struggling retailers. Mervyns closed around the holidays, followed by Circuit City and Home Depot's Expo Design Center. Anderson's TV, Don Sherwood Golf & Tennis World and a couple of mom-and-pop retailers have also pulled out. A Good Guys store that shut down a few years ago is still vacant.

In one parking lot, a visitor can see four empty storefronts by simply turning 360 degrees. Building facades have been stripped of signs, making it difficult to tell which retailers once called this area home.

Similarly, Antioch's Somersville Towne Center mall is suffering after the departure of an array of retailers, with one anchor, Mervyns, gone and another, Gottschalks department store, planning an exit. In Tracy, the West Valley Mall - owned by bankrupt parent General Growth Properties - has a number of closed shops, and the Gottschalks there also plans to close soon.

On a recent afternoon, the Floor Store in Dublin was empty of customers, an increasingly common phenomenon since Circuit City closed next door. Only a handful of people had walked in since morning.

"Five is not so great," said Forrest, the assistant manager, after checking a list of shoppers that the staff updates throughout the day.

She was hopeful about a Jacuzzi store moving into Circuit City after seeing workmen in the building. In fact, a spa, pool and patio store had only leased the space for a three-week clearance sale, unbothered by the red color scheme favored by the previous tenant.

Next month, the Floor Store plans to relocate across the parking lot to another building left vacant last year when the Don Sherwood golf shop moved out. Because the storefront is more visible from the street, it should attract more customers, Forrest predicted.

Linda Maurer, economic development director for Dublin, said she still believes the area where empty stores abound remains a beacon for shopping. She pointed to its high-profile location near the intersection of Interstates 580 and 680, the heavy street traffic and a BART station scheduled to open in the neighborhood next year.

"Maybe we're putting on our rose-colored glasses, but that's still a very attractive place to be for retailers," Maurer said.

Restoring the area's luster could take two years, she acknowledged, and not just because the economy must first recover. The vacancies are garnering some interest, she said, but ultimately the companies say the buildings are simply too big.

Maurer suspects that the cavernous stores will have to be subdivided or razed and replaced.

In the meantime, the loss of sales tax revenue, combined with a drop in residential property values, is eroding Dublin's coffers. A $3 million deficit is projected for next fiscal year, up from a $2.5 million deficit this year, making for tough choices over which programs to cut.

On the bright side, a Target store in the neighborhood appears to still be doing a brisk business, despite being surrounded by emptiness. Nearby, sales at the GameStop video game store and Aaron Brothers Art & Framing are up from a year earlier, according to their managers.

Helen Bulwik, managing director at New Market Solutions, a retail industry consulting firm, said a few isolated cases of mass vacancies in the Bay Area doesn't mean that all local shopping centers are being hit hard. But count on more retailers to go out of business or consolidate in the coming months, she said.

Revitalizing a troubled shopping center is possible, Bulwik added, in some cases by bringing in new kinds of businesses such as entertainment rather than retail. There are limits, however, based on the area's demographics.

"You can't take a discount mall and, all of a sudden, put in a Gucci store," Bulwik said.

Despite the pockets of distress, the local retail industry is doing better than elsewhere. San Francisco's retail vacancy rate was 3.9 percent at the end of 2008, among the lowest in the nation, while Oakland's was 5.5 percent, according to commercial real estate brokerage Marcus & Millichap.

The national average was 8.4 percent.

Sandy Hill, who co-owns Lighthouse Christian Supply in Dublin with her son, said her sales were down 10 percent last year, and another 10 percent this year. Whether that's because of the economy, the surrounding vacancies or both is difficult to tell, she said.

"Anytime anyone next to you closes, you probably lose some customers," Hill said. "But God is still providing."