Home Depot Puts Parking Spaces Up for Sale

Discussion
Nov 11, 2009
George Anderson

By George Anderson

Go to the average very large Home Depot parking lot and you’ll see lots of spaces not filled with automobiles. The company has noticed these vacant spaces, as well, and decided to do something about them. No, it hasn’t come up with a plan to get much larger numbers of shoppers to its stores and fill up all those empty spots. It is looking to sell off chunks of space to fast food operators, pet supply retailers and auto parts suppliers that may have an interest in sharing a lot with the DIY chain.

“Our customers also own their own homes, take care of their cars and typically have pets,” Mike LaFerle, vice president of real estate for Home Depot, told The Atlanta Journal-Constitution. “We’re actively going out and seeking end users directly, rather than developers who would seek to tie up the properties.”

Home Depot has hundreds of stores where it is looking to sell off parking lot space. “A number of stores have barren asphalt, and it’s not in anyone’s best interest to leave it sitting there,” Mr. LaFerle said.

Colin McGranahan, a senior analyst with Bernstein Research, called Home Depot’s plan to sell off parking lot space “a neat, innovative strategy.”

Kirk Williams, associate director for retail services at Cushman & Wakefield in Atlanta, told the Journal-Constitution, “It’s a good strategy. It’s no different from a power center anchored by a Target or Kohl’s, with small tenants like Sally Beauty Supply as a co-tenant.”

Discussion Questions: What do you think of Home Depot’s decision to sell off parking lot space? Is this the right time for the chain to be looking to do this? Do you expect other big boxes to follow suit?

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21 Comments on "Home Depot Puts Parking Spaces Up for Sale"


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Doron Levy
Guest
Doron Levy
11 years 6 months ago

Great idea but maybe they should focus on filling those spots with cars. In those cars are customers that will shop the store. I understand the need to turn empty space into cash and selling off chunks of land may ease the pain in the short term but there is a reason those lots are empty and it is indicative of a bigger problem at HD. Again I say, focus on retail, not dollar taco deals.

David Livingston
Guest
11 years 6 months ago

This is a great idea. I don’t think it will generate much but it will generate something. Wal-Mart allows for RVs to park overnight, I think for free. Kmart is now having employees park in front of the store to give the appearance that customers are inside. This leaves hundred of spaces open for commuter park-n-rides, farmer’s markets, used car sales and semi trailer storage.

A vacant Wal-Mart’s parking lot in New Orleans was used to house a temporary medical clinic. I’ve seen other parking lots used for a tent camp for migrant workers. One time in Michigan, I saw a Kmart parking lot used for outdoor roller hockey leagues.

Mel Kleiman
Guest
11 years 6 months ago

Location, location, location… Home Depot has some great locations and the appeal of turning empty spaces into profitable real estate is a great move. The real question: What has taken them so long to figure this out?

Steve Montgomery
Guest
11 years 6 months ago

I think all would agree the preferred outcome for Home Depot would be to fill those empty spaces with customers shopping in their stores. If they don’t foresee that happening, then it is prudent for them to seek ways to leverage their investment in the land. Selling or leasing out lots would seem a logical way to do this.

Their issue will be that some of the logical tenants will be potential competitors that will want to leverage off the Home Depot traffic. Hopefully, HD will find tenants that will drive traffic to the lot that it can entice to shop.

Max Goldberg
Guest
11 years 6 months ago

There is no sense paying for space you are not using. Home Depot, after being certain it is taking care of its own customers, should consider bringing in merchants that complement the DIY store’s offerings. Just don’t make it too difficult for a customer to quickly navigate the parking lot.

Doug Stephens
Guest
Doug Stephens
11 years 6 months ago

I think this runs much deeper than a simple recognition of an opportunistic revenue stream. I believe Home Depot is beginning to see the writing on the wall that indicates that the heyday of home renovation is over. We simply will not see, at least for the next 10-15 years, the kind of growth in the home repair/renovation market that we’ve seen since the late 1980s.

That said, Home Depot is significantly over invested in massive store sites that simply won’t produce at previous levels, recovery notwithstanding.

I’m confident they’ll find users for the space in the short term but in the long term, look for Home Depot to play with much smaller store footprints.

Jerome Schindler
Guest
11 years 6 months ago

I’m not sure the localities would permit the leasing of those spaces to another business.

In many cities the big parking lots are due to local zoning requirements that require x amount of spaces per sq ft. They don’t seem to recognize that different types of stores have different numbers of shoppers per sq ft. Also, they seem to make them provide for the extreme–like the Friday after Thanksgiving. It is like having a furnace to heat your home to 70 degrees at 25 below zero when that is not likely to happen more than once a year. At 25 below, my house won’t get much above 60 but I can tolerate that for a couple of days in exchange for not having to invest in a bigger furnace.

Of course retailers like Home Depot and Lowe’s have 12 cash registers but I have never seen more than 4 in use at any one time and the localities don’t regulate that. Maybe Home Depot could save some money there.

Will Payovich
Guest
Will Payovich
11 years 6 months ago

With the growing trend toward pop-up retail, this seems like a natural for the space–especially as we move toward the holidays. (Probably too late for this year.) Guerrilla advertising, sampling, etc…it’s a great opportunity to reach the DIY audience and smart for Home Depot to monetize their real estate. (See article on pop ups from RetailTraffic: http://bit.ly/wpeBF)

Roger Saunders
Guest
11 years 6 months ago

Focus on the most important aspects of the business. Attracting consumers who are coming into the store is what is most important. Being a “parking garage” is not core to the business. Why create another group of associates in the organization to manage this space?

Ed Dennis
Guest
Ed Dennis
11 years 6 months ago
I think everyone is missing the real story here. The parking lot is empty! You can’t depend on the economy to fill up the parking lot so maybe Home Depot should try marketing something besides the empty space created by Home Depot’s shortage of marketing skills. OK, here it goes…for free! Men are out of work so they have time to do those odd jobs they have been putting off. Every community has projects in need of attention and the labor is available. People out of work need to network, to get together and help each other out. So, HOME DEPOT–why don’t you use our current economic situation to help get done the things that need doing? Get the people who know how to roof to help those who need roofs, paint, plumbing, electrical, etc. Use your big box as a hub for the talented but unemployed and see how much good you can accomplish. Start an advertising campaign around “So I hear you have a little time on your hands…” or “Pitch in to… Read more »
Dennis Serbu
Guest
Dennis Serbu
11 years 6 months ago

Sounds great, but what will you do next year? Selling off assets–even parking space–benefits one time. Another consideration is store front visibility. Here in Sunny California, it is easy to drive right by big box stores or even grocery stores that are hidden behind other retail outlets.

I believe this to be a short-term strategy that will be called into question in future years. A possibility is using the space for short-term leases for temporary (but aesthetically pleasing) buildings for small businesses looking for a “hand up.” This would include drive-through coffee kiosks or any other business that would compliment HD’s traffic. Could be a PR coup for a company trying to help small business…which is the largest employer.

Jack West
Guest
Jack West
11 years 6 months ago

Even in these recessionary times, it would seem that this would represent an ideal solution for inventory display and storage for automobile dealerships. Shoppers at DIY stores still have spendable income available and Home Depot stores are located in high-profile and well-lit locations.

Craig Sundstrom
Guest
11 years 6 months ago

I’m sure we all had the same “that’s nice but…” thought that George alludes to in his third sentence. Basically, though, HD has chosen to be a real estate developer; does that make sense in today’s overdeveloped environment? Maybe, maybe not; but the risk seems small. Of course one could also ask why HD didn’t think of this when the economy was stronger; it’s hard to believe their lots were filled even then.

Mike Romano
Guest
Mike Romano
11 years 6 months ago

I’m wondering what took so them long! These spots have never been filled, and their lots are 20% oversized to begin with.

Great locations for smaller pad sites like Dunkin’ Donuts, etc.

Mark Burr
Guest
11 years 6 months ago

Isn’t that like saying “I give up?” I have. All but where I have little other choice as in my resort home area. Even then, I do everything I can to avoid HD. I have never had a good experience there and am convinced it’s impossible. Likely they are just as convinced and are prepared to throw in the towel on their core business. Isn’t there another large retailer known for their position as a real estate holder rather than their retail position? Hello, Sears?

Mark Johnson
Guest
Mark Johnson
11 years 6 months ago

I know that every time that we go to our Home Depot, there is enough parking space for half of the Bengals Game, and this is one of the smaller Home Depots in the market. I think it makes a ton of sense to let a symbiotic merchant set up shop next to Home Depot.

John McNamara
Guest
11 years 6 months ago

I agree with Schindler. And I’m not sure even more retail square footage is a good idea for a country with so many vacancies.

M. Jericho Banks PhD
Guest
M. Jericho Banks PhD
11 years 6 months ago

This is great, great, great! Those who opine that Home Depot should focus on filling those parking spaces with cars miss the point: It IS a tactic to attract more shoppers in their cars. Consumers like convenience, combining as many small tasks into one trip as possible–especially considering gas prices. My Lowe’s has a McDonald’s in the parking lot. Brilliant!

Moving on to ancillary ideas, temporary parking lot uses are also attractive. Let the fire department use it for public demonstrations. Fireworks stands. Farmers’ markets. Custom car shows. “Taste Of” food fairs. CPR emergency training. Small concerts. Plays. Dances. (Cheap entertainment.) Pep rallies. Etc. And on a day like today, how about a celebration of our veterans?

Our recession is a time for scrappy retailers to do scrappy things. Tactics rule during times like this, and nimble, innovative tactics are especially beneficial. Besides convenience, consumers also like novelty. Fill those parking lots in any way possible.

Doug Pruden
Guest
Doug Pruden
11 years 6 months ago

Empty parking spaces certainly don’t help the bottom line nor do they give potential customers a positive sense about the retailer as they drive by. (Interesting discussion point about Kmart having employees park in front to give the impression that it has somewhat of a crowd and is a popular place to shop.)

Assuming the current situation is not a leading indicator of a long-term death spiral for HD I would have two concerns about selling off parking spaces. 1) Will the reduction of spaces eventually make parking more difficult and time consuming to the point where it will cause customers to be less likely to come back ever? 2)What kind of uses will the space be put to? (Low-end retailers? Flea markets?, Truck parking?) And how will that impact the visibility of the HD stores, the impression of quality, the image, and the overall experience of shopping at HD?

Russell Jenkins
Guest
Russell Jenkins
11 years 6 months ago

Home Depot is only realizing what retailers and retail developers have always been doing–maximizing the potential of under-producing space. Most retail parking lots are designed and built not for anticipated demand, but because of local zoning requirements. Utilizing excess space via lease or sale not only generates additional income (permanent or temporary), but also can create synergies benefiting all participants.

Christopher P. Ramey
Guest
11 years 5 months ago

Home Depot’s parking spaces are controlled by city codes. Large facilities require lots of parking. It will be a rare community that allows variances for the big box due to poor business conditions.

The under-producing space is inside the building; not outside in the parking lot.

Furthermore, tents and outside vendors disrupt the normal flow of traffic, and it often creates a dangerous environment.

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