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About 36 million square feet of vacant retail space is coming online as 324 anchors have or are expected to close
CHICAGO, April 25, 2017 – More than 300 department stores are closing this year, putting about 36 million square feet of vacant space back on the market, according to JLL's latest retail report Empty to Alive: The Next Use for Department Store Space. Which begs the question, what will become of all that empty space? According to our research, we expect shoppers should expect to see more restaurants, entertainment venues, grocery stores and even other department stores.
"In the United States nearly half of shopping centers' gross leasable area (GLA) is devoted to department stores, compared to less than one-third of GLA in the United Kingdom. Retail space isn't overbuilt, it's under repurposed. But that's changing fast," said James Cook, Director of Retail Research at JLL.
With empty stores on the horizon, mall owners are actively looking to transform anchor space and it's paying off. "Historically, rents paid by department stores have been extremely low – usually less than $10 per square foot. As they become vacant, owners have a new opportunity to re-tenant the space and create a significant financial boon," added Greg Maloney, CEO of JLL Retail.
Take for example Seritage Growth Properties, which has 266 properties originally leased to Sears Holdings. It's now redeveloping and re-leasing space originally held by Sears and Kmart stores to new tenants. JLL's report revealed that Sears was paying on average about $4.40-per-square-foot across the portfolio. But through repurposing and creatively rethinking about space, Seritage has attracted new tenants who pay on average $18.55-per-square-foot. That's 4.4 times the previous rental rate. As of March 2017, apparel tenants, restaurants and entertainment venues have made up nearly two-thirds of the new leases.
JLL's report found that several large-format retail concepts fit well into former department stores:
"Beyond dining and entertainment, categories like fast-fashion, cosmetics, sporting goods, home furnishings, and even department store operators like Von Maur are taking space in former anchor locations," concluded Holly Rome, Director of National Retail Leasing, JLL. "The best use for an empty anchor will vary and be dictated by the demographics and lifestyles of the surrounding community, but the many options available might come as a pleasant surprise."
JLL's retail experts partner with retailers, investors and owner/operators with an extensive team of dedicated experts around the world. They understand the inherent complexities and variability associated with both the retail industry and increasingly complex capital markets. JLL's specialists are recognized for their independent and expert advice to clients, backed by industry-leading research that delivers maximum value. With leading in-depth knowledge of the local, regional and global market dynamics, JLL aims to truly partner with its clients for the entire lifecycle of an asset or lease. Its experts deliver clients maximum value to support and shape their investment, site selection and brand strategies.
JLL is the largest third-party retail property manager in the United States with more than 1,000 centers, totalling 125 million square feet under management. The firm has more than 140 retail brokerage experts spanning more than 30 major markets, representing more than 900 retail clients. In 2015, JLL's retail experts completed transaction management and portfolio optimization on 1,500+ leases, negotiated 500+ leases for retailers and 1,000+ leases for landlords and completed more than $2.7 billion of investment sales, dispositions and financing for investors. For more news, videos and research from JLL's Retail Group please visit: www.jllretail.com.
JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. A Fortune 500 company, JLL helps real estate owners, occupiers and investors achieve their business ambitions. In 2016, JLL had revenue of $6.8 billion and fee revenue of $5.8 billion and, on behalf of clients, managed 4.4 billion square feet, or 409 million square meters, and completed sales acquisitions and finance transactions of approximately $136 billion. At year-end 2016, JLL had nearly 300 corporate offices, operations in over 80 countries and a global workforce of more than 77,000. As of December 31, 2016, LaSalle Investment Management has $60.1 billion of real estate under asset management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com.
Katie Sershon, JLL
+1 312 228 3127
Jesse Tron, M Group
+1 212 266 0192