What Will Replace Movie Gallery Stores?

Movie Gallery is closing its remaining 2,400 namesake and Hollywood Video stores after filing for bankruptcy last year. New technology, such as streaming video, and rivals like Netflix, are killing off brick and mortar movie-rental outlets.

Landlords could have a similar announcement by rival Blockbuster Inc. to look forward to in the future, as that chain deals with similar problems.

Store closings aren’t that new in this current environment, and the Movie Gallery news is by no means unexpected. But what will replace these stores?

Walgreen, Panera Bread and other concepts are expanding right now. Are any of them a good fit for former Movie Gallery sites?

16 Responses to “What Will Replace Movie Gallery Stores?”

  1. 1 Doug May 4, 2010 at 8:42 am

    Ian: Having consultanted to Movie Gallery/Hollywood Video, and familiar with numerous locations all around the US, I currently represent a large chain of portrait studios, however, we don’t need as large a space as HV / MG, thus the most likely scenario is to combine and co-locate with another retailer like a Coffee Shop, yogert retailer, or other noncompetitive use and thus use up all the space benefitting the Landlord, our growth, and the consumer for more convenience.

    THe other type of use I can foresee is the Doc In A Box is very popular, but Landlords need to be very careful about the haz mat issues it can raise.

  2. 2 James May 4, 2010 at 9:18 am

    Dialysis Centers!

  3. 3 Michael Romelotti May 4, 2010 at 10:33 am

    As a former senior real estate manager for supermarket and specialty retailers, I envision a number of highly competitive users and uses. Given that the Hollywood Video (“HV”) stores are in primary major metro markets, within highly desirable demographic trade areas, I suspect that they will be offered first to the landlords, then secondly as a bulk sale.

    The Movie Gallery (“MG”) portfolio is a bit more problematic; wherein the business modcel was based on developing and rolling out stores in secondary and tertiary regional markets and trade areas, where there was little, or no competition from the likes of a Blockbuster. And now given our current economy, I wonder how many of these markets hold interest to, and with, any national retail chain.

    In both instannces, and in response to Ian’s rhetorical question as to whether any of the HV/MG buildings might be replcements for Walgreens or Panera… Unless a “Pharmacy” user can assemble more real estate, these boxes are not sufficiently capable; however, as James, the respondent above indicates, a “Doc in the Box”, an Urgent Care type use might be feasible. I can see where one of the major pharmacy chains might be interested in developing and rolling out, as a singular use, a “Minute Clinic” (a la CVS), coupled with a scaled down prescription and sundries footprint.

    The HV opportunities would be great for a Dollar General, as their expansion plans include urban markets, but, as in many of the retail chains, can they, and/or will they be able to afford the entry costs?

    • 4 KEVIN J. May 5, 2010 at 1:24 pm

      Mr. Romelotti,

      It is nice to see you still know your stuff. Best wishes.

      The Top Poker Playing Broker in the US


    • 5 erljr May 8, 2010 at 1:14 pm

      Haven’t you noticed, however, that Walgreens and CVS only want BRAND NEW buildings. Here they are in the process of moving out of all strip malls and building new stand alone buildings at major intersections. So all over town we have empty Hollywood Videos and Walgreens, where no one else fits. However all the Walgreens have a brand new Walgreens nearby.

  4. 6 Barry May 4, 2010 at 11:02 am

    Too small for drug chains, Panera runs 4,500 sq. ft. and need more parking than a video chain. Maybe divide them for franchises like Subway, Dunkin Donuts, Domino’s are very strong. Local banks still take branches. Auto parts, sushi,ice cream and yogurt are strong. Landlord will lose income and have a lower rent roll from this. The video chains were high rent payers in their good times. They also built good traffic for these small strip centers.

  5. 7 Jeff May 4, 2010 at 11:44 am

    It would be very surprising to learn that any of their Landlords did not forsee this announcment. With that in mind I also have to believe that they have been beating the streets looking for replacement tenants for these spaces. For the most part these spaces are prime locations within the centers making them easier to lease in good times. Unfortunately these are not good times and it may take some time to see these spaces absorbed. Landlords will have to be cautious not to lease these spaces to tenants that may not be a good mix with the other tenants in the center, or tenants that do not have track records. No one wants to repeatedly lease the same space over and over again as the cost associated with this can be high.

    In most cases these spaces will have to be divided into two spaces making the effort double the trouble. Let’s hope for all in the industry that this trend of bankruptcy doesn’t continue and the ecomony starts a new cycle soon.

  6. 8 Chris May 4, 2010 at 12:48 pm

    How could the current administration let them fail? I’m surprised they didn’t want another piece of the Entertainment Industry.

    Jeff presents the most compelling response. The spaces are too big for any one Tenant, which now means splitting the space and the LL having to do TI. Not many LL wanting to throw cash around right now.

  7. 9 Barry May 4, 2010 at 1:51 pm

    GameStop or their competitors would take part of these spaces. Play & Trade just opened a new one here. Hollywood has been out for a few years here and now Blockbuster is closing its franchisee stores.

    Bad: Video, Mattresses, Loan offices, Lighting Fixtures,Furniture, Motorcycles, home gym equipment, musical instruments, CDs & DVDs, $800.00 ladies shoes, bare bones ladies exercise storefronts.

    Good: Food franchises, Ethnic restaurants, local banks, dollar stores, 7-11 types, Pizza, bars, auto parts, Karate, large discount gyms & exercise.

  8. 10 Billy May 4, 2010 at 4:03 pm

    I like something that has to do with uses of TARP funds.

  9. 11 pt May 4, 2010 at 5:33 pm

    How about a video store for the old Movie Gallery locations? Red Box would still perhaps pose some threat, but I’d think that a traditional movie store still offers some of the best affordable entertainment in many small markets. I’ll bet that a PE firm steps in to buy this entire portion of the portfolio and renegotiates the leases.

  10. 12 Trish Walden May 5, 2010 at 9:15 am

    These are all good ideas, we are seeing the internet again spurn instant gratification by downloading what is wanted NOW. Hard to compete with reserving, driving and renting.

    Depending on the relationship of the space to the center there will be lots of opportunities for owners to fill.

  11. 13 Metro May 5, 2010 at 2:33 pm

    I think that for some of the MG locations, a lower grade Doc in a Box might have some feasibility in places where companies like Concentra aren’t big players. Given the popularity of Netflix, the ability of Wal-Mart and Target to sell DVDs for virtually nothing, and the growing streaming video market, I don’t ever see movie rental as a viable option ever again.

    Given the high (40% to 55%) unemployment amongst the 16-24 video game set, as well as the online component of the video game industry, players have to own rather than rent.

    Single member practice physicans, hospital clinics, outpatient testing, dental, optical, hair/nail salons are probably the best bet. Banks like to build their own buildings. New franchise businesses can’t get financing; established franchise owners with cash didn’t like these locations 5-10 years ago, they’re not likely to change their minds today.

  12. 14 Patrick May 5, 2010 at 2:39 pm


    • 15 Doug May 6, 2010 at 10:04 am

      Scrabble for Consultant and Participant. When you don’t see the train of technology leaving the station, and your ticket says “1990”, you know there is something wrong with your business model.

  13. 16 Dean May 10, 2010 at 9:00 am

    Splitting these spaces up for high demand small shop users such as Great Clips, cellular and the like is an attractive outcome.

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