At the largest retail real estate conference on the East Coast, put on by ICSC, last week, a handful of landlords spoke to CNBC about demolishing a Sears store being a cheaper and faster option than back-filling the existing structure. Some mall owners have been finding success in dividing up a vacant Sears store for numerous tenants. PREIT, for example, took an old Sears store at Viewmont Mall in Scranton, Pennsylvania, to bring in Dick’s Sporting Goods, Field & Stream and HomeGoods.
By and large, demolition can prove to be the better option.
“I would tell you in so many instances, I’ve seen developers [doing remodels] tell me, ‘Gosh I should have just torn down the building. You don’t know what will be behind this wall or that,” Nick Hernandez, head of retail services for commercial real estate company Transwestern, told CNBC. “Most of those [Sears] boxes are going to be harder to reuse as they are. I bet you most of them are going to be torn down.”
One of the best examples of this trend so far is Esplanade at Aventura in Aventura, Florida, where mall owner Seritage has entirely demolished a shuttered Sears store to commence construction on a new open-air center that will include fine dining options and high-end retail. It’s set to open next year.
“Seritage is leading the way in showing what can be done with these Sears locations,” Greg Maloney, president and CEO of JLL’s Americas retail division, said. “It takes time, but they are doing it.”
Maloney said it could cost a landlord roughly $100 per square foot to retrofit an old Sears store, or break it up into three or four spaces to be used for new retail (with restaurants and other types of uses costing more or less, depending). Whereas demolition could cost closer to $30 per square foot, and building a new shell (or set of stores) on top of the dirt could cost about $30, he said. In this case, demolition and building a new structure from the group up would be less expensive.
Overall, “it all depends on location, and who’s going to be doing it,” Maloney said. “All of those things you have to take into consideration.”
Many mall owners are now considering themselves mixed-use developers, meaning they are looking to add apartment complexes, hotels and office spaces adjacent to retail and restaurants at their properties. This was another theme at the ICSC conference last week, as landlords spoke about how they envisioned co-working and medical facilities moving into malls, replacing department stores, of which the U.S. arguably still has way too many.
“For a landlord to create from and adapt [an old Sears store], it definitely is much more cost prohibitive” to use the existing space,” Anjee Solanki, director of retail services at Colliers International, said. “You have columns … and ceiling heights that are no longer relevant.”
It would be “far cheaper” to tear it down, she said.
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