Since the big squeeze started four years ago, we’ve seen lots of retail companies go out of business, change locations or infill/ backfill. As survivors adjust to reality, innovative ideas continue to pop up. Two of these are on my radar at the moment: right-sizing big boxes and creative uses for excess second floor space.

Right-Sizing.

Recently, it seems healthy retailers are getting new starts and becoming healthier by “rightsizing” their current square footage. This means staying within their box, but reworking overhead in proportion to sales volume. In many cases, this plays out as a sublease of space to complimentary, non-competing retailers.

We are working with a customer right now who has a development of 90,000 sf. This single tenant will reduce their footprint by 40% as they bring in a for-profit college. This is obviously not retail, but it does solve the occupancy problem. The college will bring vitality, energy and several hundred people to the center each day.

To me, the real key is the balancing act as the economy heals. When the GDP grows, the retailer may need more space in that same location. Shorter-term leases for their new neighbor could be the answer.

Second Floor Space.

Too much big box space has a cousin: too much second floor space.

During the boom, we saw lots of good-looking proformas using upper-level open-air retail. The fact is, second floor retail works in a only few locations. Most of this space has remained vacant.

I was in Florida last week looking at a “note buy” project with some pretty good retailers below. I brainstormed with the new owner about opportunities on the second floor. Since this is a high tourist area with a heavy density of vacation condos, one idea is to create executive office space for those coming on vacation. It could provide short-term connectivity for those needing to check in on work matters for a few hours during their stay. We also discussed introducing service companies in the second floor space. While they are not retail, they bring people and life to the center.

Just like Detroit, it’s amazing what a good recession can do for us.

While it has been painful, I do believe the downturn helped get us all on the right track. Internally, we are tightening up, trying not to “waste a good recession.” We’ve gotten creative and try to help our customers do the same.