'Retail apocalypse' leaves few retailers to take HHGregg's space

That HHGregg store near you might never be filled again — at least, not by a retailer.

Indianapolis appliances and electronics seller HHGregg Inc. is in the process of closing all of its stores, including 17 Indiana locations and seven that are within 40 miles of Indianapolis. While some of the openings are in prime locations that will attract interest, all of them face uncertain futures.

HHGregg's liquidation comes amid what analysts have dubbed the "retail apocalypse," the worst period of retail bankruptcies and closings since at least the Great Recession. As the second quarter begins, retailers already have announced plans to close more than 3,000 stores this year — so many, in fact, that HHGregg's 220 closings only rank fifth-most in the U.S., according to a list compiled by Business Insider. RadioShack, Payless ShoeScource, The Limited and Family Christian Stores top the list.

"We're over-retailed," said Mark Millman, CEO of retail consultancy Millman Search Group. "Retailers are just downsizing to consolidate and make themselves profitable."

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For HHGregg, what began as a consolidation — the company in March announced it would close 88 underperforming stores — quickly spiraled into bankruptcy and liquidation. Even before HHGregg officially collapsed, landlords began preparing to fill vacancies created by the 62-year-old company's failure.

"We were anticipating, if this were to happen, what direction we might go with the marketing of the properties," said Larry Davis, a first vice president for CBRE Group Inc.

CBRE manages HHGregg locations on East Washington Street in Indianapolis and on U.S. 31, just north of Greenwood. Davis expressed confidence that HHGregg stores would find new tenants, particularly the two represented by his firm.

The Greenwood-area location "sits in a very tight pocket of retail that has had redevelopment occur on both sides of the street," Davis said. "It's an area where good space is very hard to find. The East Washington location is on U.S. 40 and there's not a ton of (big-box) vacancy in that market. So, if you look across the state, most of these (HHGregg locations) are not in areas that are struggling. It's welcome inventory in some cases."

Having prime real estate is one thing. Finding a retail tenant is another. At a time when inventory is shifting from brick-and-mortar stores into warehouses managed by e-commerce leaders such as Amazon.com Inc., there's no guarantee that even a big-box store in a good location will attract another retail chain.

Davis acknowledged that it could take new uses to fill at least some HHGregg sites.

"We're seeing adaptive reuse; things like entertainment are becoming bigger consumers of retail space all the time," Davis said. "Use of retail facilities by medical practitioners and providers is also a trend we're seeing."

Davis cited a long-vacant Kroger in Mishawaka that became a medical pavilion. In other cases, he said, grocery stores have filled properties vacated by non-grocery retailers.

Simon Property Group Inc. increasingly has used entertainment to fill undesirable retail spaces. For instance, the company filled part of the former Nordstrom space in the Downtown Circle Centre mall with Punch Bowl Social, which includes dining, bowling and other games. The mall also has a black-lit mini-golf course called GlowGolf.

In the Chicago area, some retail locations have become recreation and entertainment businesses, such as rock climbing gyms and trampoline parks.

HHGregg's headquarters and flagship store is on 96th Street, east of Keystone Avenue. The chain also has stores in Noblesville, Avon, Anderson, Kokomo and Muncie.

Jacque Haynes, a senior vice president for Cushman & Wakefield, said Indiana's HHGregg locations are a mixed bag. On the Greenwood-area location, Haynes agrees with Davis, noting Greenwood has a retail vacancy rate below 3 percent. In high-demand areas such as Greenwood, Haynes said she would expect an HHGregg location to be on the market between six and 12 months.

In more troubled areas like East Washington Street, though, Haynes said those locations are more likely to linger for at least a year or two before finding a new tenant.

"Some are freestanding and align themselves well to redevelopment," Haynes said. "Greenwood, again, might be an example of that. There are a couple others, like Terre Haute, that could be transformed into (another use). That's not the case for all of them. Lafayette's is in the mall, which is faced with its own challenges, especially (with) anchors like J.C. Penney and Sears."

HHGregg's stores typically are between 25,000 and 30,000 square feet. While the prospects for finding retail tenants to fill those spaces in the near future might be dim, it's not entirely out of the question.

Haynes noted that at least two big-box retailers have recently have moved into the Indianapolis market. Weekends Only Furniture and Mattress in 2015 took space in Castleton that used to be occupied by Burlington Coat Factory. Bob's Discount Furniture has leased two 30,000-square-foot-plus Kittle's Rooms Express locations in Castleton and Southport.

The retail landscape will become clearer when the International Council of Shopping Centers hosts its RECon conference May 21-24 in Las Vegas. The annual event brings together retail executives, real estate brokers and government officials.

If Davis is lucky, he could return with a tenant or two lined up for HHGregg spaces.

"From a timing perspective, this is the big dance of the year with national retailers and retail users, brokers and developers," Davis said. "I guess, if there is good timing, this would be about as good as it gets because we'll be with the likely candidates."

Call IndyStar reporter James Briggs at (317) 444-6307. Follow him on Twitter: @JamesEBriggs.