Don’t look now, but the newspaper might not be your only reading source that is fighting for its life against new technology. Amazon.com reports that, in the past three month period, it has sold more e-books than print books – 143 e-books for every 100 print copies. While this has huge implications for the publishing industry, the tech industry, and the literary industry, it also affects real estate and land use decisions. As demand for physical books declines, some believe that large book retailers like Barnes & Noble and Borders could soon be vacating an enormous retail space near you, leaving a difficult-to-fill retail hole.
Stories of Barnes & Noble’s and Border’s jump into the e-reader market, and the battle between Barnes &Noble’s Nook, Borders’ Kobo, Amazon’s Kindle, Sony’s E-Reader and the IPad for dominance of that market further illustrate the evolution of the publishing industry towards a digital future. Add to that a digital transformation of these large booksellers’ other major sales item – music – and you have a recipe for brick and mortar bookstore troubles.
Some are already discussing what developments to expect in the near future. In their July 9, 2010 SCT Week on-line newsletter, The International Council of Shopping Centers (ICSC) wrote that many of these large stores – averaging about 25,000 square feet and maxing out around 60,000 square feet – will soon shrink or shut down. These are some of the largest and most unique retail spaces around and may be difficult to re-lease. The report suggests that many of these spaces will be forced to divide into 5,000 to 10,000 square foot segments. All is not lost yet, notes the author, citing the fact that bookstore chains still make up 27 percent of the book market, compared to the 20 percent online share of the market.
The North Bay Business Journal has reported on the creative uses that are beginning to fill the vacant big box stores in Sonoma, Marin and Napa counties. Examples of adaptive uses include indoor cart racing in an old Linens ‘n’ Things, an ethnic grocer in an old Circuit City, a Trader Joe’s in an old Barnes & Noble. Some creative short-term uses have been employed, like a short term car dealership lot, but many aren’t worth the hassle of preparing the space, getting special insurance, and cleaning up that go along with them. You can find the article at: “http://mytinyurl.com/mmpccwtyzv.”
Big booksellers in San Francisco appear to be weathering the storm so far. Currently, there are four Borders and one Barnes & Noble in the City. Three are in downtown/SoMa, one is in Fisherman’s Wharf and one is at the Stonestown Galleria Mall. To date, they continue in business with no obvious signs of being negatively affected by the e-reader explosion. In fact, the Borders at the Westfield San Francisco Centre on Market Street opened just back in 2006.
Oakland, however, has not been so lucky. The Barnes &Noble in Jack London Square closed this past January, leaving a gaping whole in a neighborhood that appeared to be making a comeback. What’s happening with the space now? An “art salon” there a couple of weeks ago featured various still and moving image exhibits and a rock band made up of three girls that couldn’t have been older than 16 years old. A creative idea, but clearly not the highest and best use of the space. However, the Oakland Tribune’s Tammerlin Drummond has reported that there are rumors a Trader Joe’s could be moving into the space – one of the few retailers that could use a retail space that size. White knight tenants like this, though, can’t be expected to plug all of these holes.
Back in San Francisco, it doesn’t seem likely that any new big bookstores will be built any time soon. The fragile retail market and the burdened of the City’s conditional use requirement for chain stores in most parts of the City means new stores are unlikely, even in vacant spaces.
Hopefully San Francisco will be able to avoid a loss of any of its big box bookstores. Anyone who has been to the Borders by the ballpark recently would have no reason to think these businesses might be in trouble. However, as Amazon.com’s news reminds us, the bookstore market is anything but predictable right now. One thing is for sure: if one of these bookstores does go out of business, filling the space will take some creativity.
Reuben & Junius, LLP is a full service real estate law firm. We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leases, purchase and sale agreements, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.
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