Costco drops plans for East Lyme store
East Lyme — Costco has dropped its plans to open a big-box store at the Gateway Commons site off Interstate 95's Exit 74, the Gateway developers confirmed Wednesday.
The developers said they now are marketing the site for a new retail tenant.
Newton C. Brainard, vice president of Sikon Development Corp., said Costco informed the developers about a week ago that the retail company made the decision to pull out of the lease for the East Lyme site. He said the company did not provide a specific reason, but he noted that retail in general is in a period of disruption. The store would have brought hundreds of jobs to the region, he said.
Early this year, Costco also announced that it would not build a 158,000-square-foot store it had planned in Branford, the Branford Eagle reported.
Brainard expressed disappointment, but said the Gateway developers will continue to push forward with the development of the East Lyme site.
"We did everything we could," he said, noting that the Gateway developers invested nearly $1.7 million for the work involved to bring Costco to the site. "Sometimes it just doesn't work out. It’s the nature of the business."
He said on the positive side, the work that the developers already invested in the site — including designing traffic and infrastructure improvements — means they will be much further along in the process for a new tenant, though additional work still will be needed.
"We immediately have begun to market the site again and have begun to get some interest," he said.
He said the developers are confident they will get a new tenant. But he noted it is a difficult time, as large retailers are not expanding, so the developers will have to work hard. They have plans to pitch the site at a trade show in New York City.
A Costco spokesman, who asked not to be identified, did not specifically comment on the decision. The spokesman said by email that it is a company policy to not comment regarding future Costco warehouses until the retail company is ready to share details about a new location, typically two to three months in advance.
First Selectman Mark Nickerson said Costco had been committed to the site and spent a lot of money during the process of getting approvals for the gas station and planning upgrades, along with the developers, of the on/off ramps and Flanders Road. He said Costco's decision comes at time when retail is suffering a bit nationally, and when Amazon acquired Whole Foods and people are ordering everything online.
"What the town will do is continue to work with the developers in getting this project fully built out," Nickerson said. "We’ll also be working with the state DOT to properly upgrade the bridge over Flanders Road and the four on and off ramps to bring them up to proper standards to account for not only the current traffic, but the traffic that will be increased by the Gateway development."
Nickerson said that with the state of retail in the country, he will encourage the Zoning Commission to also look for alternate uses for the site, such as an office/medical park.
Nickerson said the development eventually will bring jobs to the area, it just will be later than anticipated. He said the town estimates that once developed, the Gateway site, including both retail and residential, will have a $3 million to $4 million net positive impact on the town.
The 200-acre site off of I-95 Exits 73 and 74 is zoned as the Gateway Planned Development District under the town's zoning regulations. The town's Zoning Commission gave its approval in 2008 to KGI Properties and Simon Konover for a master development plan for Gateway Commons with a residential component and a commercial phase of 425,000 square feet of retail, with a big-box anchor store and five smaller "junior anchor stores."
The commission approved in October 2016 a 138,000-square-foot big box store, with a gas station for the site. Though some in the community had raised concerns over a gas station at the site, members of the Zoning Commission said that there were enough safeguards in place and that the station would be outside of the town's mapped, updated aquifer protection zone.
Zoning Official Bill Mulholland said Wednesday that the approvals are still in place for a Costco or another development of similar size and use.
He said the regulations that govern the commercial side of the Gateway Planned Development District also allow other uses for the site, such as office use. Though the developers may need to adjust the permitting if they wish to bring offices to the site, the zoning board would be willing to listen to their position. He said the site is the last large parcel in the community that is zoned for uses such as retail and offices.
Brainard said the permitting for interim roadway infrastructure improvements to open the Costco was 90 percent complete.
Meanwhile, the state announced last spring that it intends to make long-term improvements to the Exit 74 interchange, with construction planned to begin in 2021 and wrap up in 2024. That work was not specifically tied to the Costco project.
In addition to the work on the commercial component, the developers are planning for the second phase of the residential development near Exit 73, which currently has 280 apartments.
At a meeting planned for 7:30 p.m. Thursday at Town Hall, the Zoning Commission is slated to consider a text amendment to the master development plan. The developers are seeking to eliminate the construction of a bridge over the Pattagansett River as a requirement for the second phase of 120 apartments. The developers instead are asking that the requirement be transferred to the final commercial phase of development, Mulholland said.
If the text amendment is approved, the developers still need to return to the commission for a site plan for the 120 units, he said.
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