Ruminating on a common theme at RECon this year, a panel that included a Macy's real estate executive, an investor, some developers and a retail architect addressed the pressing issue: "What Are We Going to Do With All These Boxes?" — as their well-attended RECon session was titled.
Doug Sesler, executive vice president of real estate at Macy's, says the disposition of 120 million square feet of Macy's space resulting from the closures of 100 stores — some of them in buildings that are several decades old — is "like a Rubik’s Cube," because of such complexities as reciprocal-easement agreements. "We are not developers, but we are going to have to think like developers," he said. "We are facing questions such as, 'Should we "de-risk" a box so we make it more attractive to a buyer?' and 'Is the [property] value higher than the productivity of the existing space?' There are so many different challenges and variables, and it takes time."
Macy's has had some success reselling former store sites, particularly its Union Square buildings in San Francisco, including a 236,000-square-foot Macy's Men's Store and a 250,000-square-foot mainstream Macy's store, which were sold to investors at about $1,000 per square foot, Sesler said. The Men's Store site is being redeveloped into a multishop arcade, which required the paring down of the original elevated slab to street level, while the mainstream store is being redeveloped into some adapted offices and street-level retail.
Jonathon Lischke, executive managing director of Merlone Geier Partners, is redeveloping a former big-box site on 25 acres in Los Angeles into a 500,000-square-foot project for multifamily, offices and retail. "The problem is, everybody has different motivations: The city wants to see retail, and the community and the developer want something different."
Fitness, specialty groceries and medical facilities are among the good uses for vacant big-box space
John Clifford, founding principle of S9 Architecture, said his firm always looks for the highest and best use for clients of the many big-box fortress stores on the market. "Our objective is to create a sense of place where a rising tide lifts all boats," Clifford said.
The session moderator, Seritage Growth Properties CEO and president Benjamin Schall, said the average makeup of redeveloped and new retail complexes in his firm's portfolio now comprises roughly 40 percent entertainment — including food-and-beverage. The Dave & Buster's and Round One restaurant-arcade hybrids have been leasing actively, as have such national restaurant chains as Darden and an array of regional and local eateries. Also keen on closed big-box store sites are TJX Cos. concepts and home-goods retailers, both of which are now entering secondary markets, according to Schall. "They are a good fit for those spaces," he said. Other productive replacements for closed boxes are expanding fitness chains such as LA Fitness and Life Time Fitness; specialty grocers; medical offices; and discount soft-goods retailers, said Lischke.
Though Macy's has closed about 100 Macy's stores, Sesler said the company also plans to roll out roughly that same number of units of the Backstage discount-store smaller concept over the next year, with locations in existing stores and in new locations.
By Steve McLinden
Contributor, Commerce + Communities Today
