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Neiman Marcus Leases Could See Use Conversions, Retail Experts Say

The four leases put on the market by Neiman Marcus Group last month as it goes through bankruptcy proceedings could yield a wide range of uses, raising big open questions for the retail sector as a whole, experts say. 

Neiman Marcus is marketing four of its leases, one of which is for its 87.6K SF downtown Walnut Creek, California, store.

The leases for stores in the Bay Area, Washington, D.C., South Florida and Seattle are being marketed by A&G Real Estate Partners, which considers some of the locations "particularly promising for conversion to hotel, office or residential use," A&G co-President Emilio Amendola said in a statement last month.

Each lease has options available through the rest of the decade or well beyond.

"All of these have value, not necessarily as Neiman Marcus department store boxes, but value from the standpoint that Neiman Marcus controls real estate in expensive and mostly dense real estate markets for a long period of time," Nick Egelanian, president of retail consulting firm SiteWorks, told Bisnow

Neiman Marcus Group filed for bankruptcy on May 7, joining a long, continually growing list of already struggling retailers forced into Chapter 11 proceedings by the coronavirus pandemic.

Though a spokesperson told Bisnow last month its original decision to market four leases didn't necessarily mean it would close any particular store, the retailer confirmed reports last month it has decided to shutter two of the locations for which it is marketing leases: its 48.7K SF Palm Beach, Florida, store and its 124.6K SF Bellevue, Washington, store.

It also said last month it is closing a new Hudson Yards Neiman Marcus store in Manhattan and one in Fort Lauderdale, Florida, on top of the 17 Neiman Marcus Last Call stores it had already decided to close.  

Neiman Marcus didn't respond to a request for comment for this story. 

Locations in Bellevue, Washington's The Shops at the Bravern shopping center and the Mazza Gallerie shopping mall in D.C. are good candidates for a different kind of occupancy, according to Egelanian, who mostly works with shopping centers. Neither market is a particularly strong one for luxury retail, he said. 

The lease for a 48K SF store at 151 Worth Ave. in Palm Beach, Florida, makes sense as one to market, given its relatively small size and close proximity to other South Florida stores, Egelanian said. Of the 43 Neiman Marcus stores in the U.S. coming into this year, five were between Miami and West Palm Beach, Florida, according to its website

Egelanian, who most often works with shopping centers, also said he suspects the options in the company's existing lease agreements are valuable.

“When you’ve got options out that far, and you’re Neiman Marcus, unless they’ve cut some very bad real estate deals, they should’ve been controlling this real estate at a significant discount of market conditions over the long haul," he said.

One store they may end up keeping is a Walnut Creek, California, location in the East Bay city's Broadway Plaza shopping mall, Leslie Lundin, managing partner of West Coast shopping center owner LBG Real Estate Cos., told Bisnow. Based in the East Bay herself, Lundin said she was very surprised when she learned Neiman Marcus was marketing its Walnut Creek lease.

“I was surprised that they would want to leave it," Lundin said. "It could just be that it’s a newer location and probably very expensive.” 

At 87.6K SF, Neiman Marcus' East Bay location could host a wide variety of uses, Lundin said, citing a range of options from a conversion to office to Neiman Marcus staying to a new Starbucks Reserve location.

Not far off, LBG is doing its own East Bay conversion from retail to office space at the former Hilltop Mall property it owns in Richmond, California.

“It’s not super cheap to do that, but certainly, when we’ve looked at converting our Hilltop anchor buildings to office, at the end of the day our cost is much less than if you were to build this new," Lundin said. "And, frankly, you’d end up building a really similar structure if you did build it new because people want these large, open floor plates and high ceilings right now." 

A&G co-President Andy Graiser told Bisnow a few retailers and other investors have already expressed interest in the leases but declined to go into greater detail. He said he is still noticing a long-term appetite for retail opportunities, but that a lack of clarity is hampering retailers and investors from making bets quite yet.

“From an opportunity standpoint, I don’t see much this year and next year," he said. "I expect the opportunities to really start to surface in maybe the fourth quarter of next year."

Late last month, Neiman Marcus took a step toward exiting bankruptcy with a dispute over the transfer of Munich, Germany-based business Mytheresa settled, opening up the possibility for the company to emerge from bankruptcy by the end of the year.

Contact Dean Boerner at