As department stores dwindle, mall owners are looking to fill those yawning gaps. How to do that is one of the biggest open questions in the retail real estate business, Green Street Advisors Managing Director Dirk Aulabaugh told CNBC at the annual ICSC RECon event this week.
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The hard fact of the matter, according to Aulabaugh, is that filling the spaces will take time, even years, and the process will be on a case-by-case basis.
Yet it will happen, as owners look to an array of non-retail uses for the empty space, such as apartments, hotels and other uses.
"You don't have to fill retail with retail anymore," JLL Retail President and CEO Greg Maloney told CNBC.
JC Penney Co. and Sears Holdings Corp., in particular, will leave owners with a lot of space to fill, since they are exiting so many markets.
After all its recent closures, JC Penney still has about 875 locations, and Sears and Kmart have 570 and 430, respectively. A complete collapse of both of those brands would thus leave landlords with nearly 1,900 department store-sized holes to fill.
JC Penney CEO Marvin Ellison, brought in as a turnaround man, jumped ship this week to become CEO of Lowe's, as JC Penney lost $69M in the most recent quarter.
As for Sears, despite its efforts to prop up the chain through ESL Investments, the retailer is circling the drain. Earlier this month, the company said it is beginning the process to explore the sale of its Kenmore brand and related assets, the Sears Home Improvement Products business and its Parts Direct business.
The reuse process for both Sears and JC Penney sites is already underway.
In Chicago, for instance, Tucker Development and Seritage Growth Properties entered a partnership to redevelop the Six Corners Sears store on the city's Northwest side, and a vacant Sears store at Harlem and North avenues in the West Side Galewood neighborhood.
In Brookfield, Wisconsin, at least three restaurant and entertainment destinations will soon take the place of the 50-year-old Sears anchor at Brookfield Square mall. A Marcus BistroPlex, first announced last summer, will occupy part of the property.
In Tampa, Florida, a long-vacant JC Penney box at Uptown mall is being torn down to redevelop the space. Landlord RD Managment hasn't revealed any commitments from new tenants for the site, though conceptual renderings show that a 37K SF health club is a possibility.
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