According to research from JLL Retail, many malls are finding few challenges replacing department stores as anchors. What’s more, the new tenants generally pay much higher rent.
The shopping center owner noted that, historically, rents paid by department stores have been “extremely low,” usually less than $10 per square foot. In the case of Seritage Growth Properties, Sears was leasing 266 properties, paying on average about $4.40-per-square-foot. Repurposing many of those Sears and Kmart locations, Seritage has attracted new tenants paying on average $18.55-per-square-foot.
Overall, JLL Retail’s report explored what happened to recently vacated department stores and found that many were repurposed by some unorthodox tenants:
- Restaurants: Pointing to a Nobu and Fig & Olive that’s replacing a portion of a Saks Fifth Avenue at the Galleria in Houston, JLL Retail said restaurants are “becoming destinations, and anchors in their own right.” An Outback Steakhouse and Yard House leased part of a former Sears at King of Prussia Mall in suburban Philadelphia.
- Supermarkets: A Wegmans will soon be taking over a J.C. Penney location at Natick Mall in Massachusetts; a Whole Foods recently opened in the first level of a former Sears at a mall in Clearwater, FL; and a Fresh Market opened in a portion of a Sears in Virginia Beach, VA.
- Entertainment: A growing number of theaters are moving into former department store spaces including two that recently opened in a former Saks Fifth Avenue and Nordstrom. Concepts like Main Event Entertainment and Dave and Busters, which offer bowling, laser tag, arcade games and karaoke, have opened in former Sears locations. At the Florida Mall in Orlando, a Crayola Experience opened in a portion of a former Nordstrom.
Beyond dining and entertainment, categories including fast-fashion, cosmetics, sporting goods, and home furnishings are taking space in former anchor locations. In some cases, off-price chains (Nordstrom Rack, Saks Off Fifth, Ross Dress for Less, etc.) have replaced Sears.
Photographer: Gary Gardiner/Bloomberg News.
In an online discussion, the RetailWire BrainTrust applauded some of the unexpected uses of department store space they have seen recently, and offered some creative mixed-use solutions of their own.
"Re-thinking the space in total and creating a revitalized multi-use space will be the mall’s salvation," said Phil Masiello, CEO of Hound Dog Digital Agency. "I don’t think there is one specific answer or one specific style. I have seen the vacant anchor spaces become indoor trampoline parks, indoor sky diving facilities, supermarkets and warehouse clubs."
"I drove past a mall recently that is now all things pediatric," said Lee Kent, principal at Your Retail Authority. "Dentists, doctors, pharmacies, etc. plus play areas. Perhaps we are over-stored but, if mall owners get creative, there are options that just might work for their demographics. It doesn’t have to be retail."
"Malls should see themselves as the center of a community — a destination to satisfy the personal, family and collective needs for shopping, entertainment, hospitality, entertainment, health care, learning and even worship," said Lyle Bunn, strategy architect.
Though some noted that it's not just the department store vacuum that malls need to fill to get back on top.
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