Chapter 2 takes us to a suburb of Austin that grew into its own as the town of Round Rock. This is closer to the type of “re-use” I was interested in when I started reading the book — a building that was previously a Walmart and was / is now being used as something else.
The really interesting part of this chapter is the interplay with Walmart as the continued owners of the land. They bought the land initially, built their store, operated it for awhile, and it was successful. Dell located its HQ in the area, things started to rocket in the local economy, and they decided to build a super-centre across the road, leaving the old location empty. While there were lots of suitors looking to buy and use the land, Walmart was happy to let it sit empty unless the deal included a lot of restrictions on what could be put there for the future — basically eliminating any business that would compete with Walmart.
Then came a proposal to use it as an indoor race track for super go-karts / low-power racing cars. Ten cars at a time, racing around the indoor tracks, with racing league nights, conference rooms (mainly for Dell to rent out for corporate events), and early adoption of wifi in the lobbies. With no competition against Walmart, the deal was done, with a local developer buying it and the race track leasing it for awhile.
Initially, the deal looked awesome, mainly because the race track people were looking for a large empty warehouse structure to race around in. They didn’t care about the location; although it was great, they mainly cared about the structure. However, that same “deal” had a built-in ticking bomb…eventually, when some of the lease restrictions eased, it was more profitable for the landlord to lease to companies who wanted the location bad enough to pay a premium for being there. And so it eventually out-stripped the race track’s revenue stream, and they rented to a gym, tanning salon, barbershop, smoothie store, and a health food place.
Whether it was Walmart’s “holding out” for the right initial deal, or the subsequent developer “holding out” for the right leasee, or even later selling it to the right buyer for more than 3x the original purchase price, all of the owners used it as a “land bank” — they bought it up and held on to it, thus controlling future developments while others built up around it.
What I also found interesting was that the racetrack found ways to even use the parking lot — for motorcycle courses and mini-races, antique car shows, carnivals, etc. … almost none of it particularly “revenue generating” so much as just straight marketing and cross-promotion.
I found this chapter had a lot of great variables that raise some interesting questions. Do most of the “land banks” generate future profits? Does it require the first Walmart to still be nearby to draw extra infrastructure? Was it just because the whole area continued to boom? Lots of big box stores like K-Marts and Zellers in Canada did not “accrue” interest acting as land banks, as the areas were essentially dying. They sometimes find alternate users, but usually at a far cheaper rate than the land bank would suggest. Equally, it raises the question of timeframe for re-use…if you looked at this one in the early days, it looks like a giant success story. Five to ten years later, the racetrack is gone, the developer got its profits, and the location seems to have been broken up some, although the gym is still there.
Again, though, like the predecessor, it is just “different retail” in a retail space. While the raceway was interesting, maybe even iconic, the ultimate reality is simple retail use. Out with one vendor, in with another.