Department store closings continue to raise concerns about the long-term viability of shopping centers, but maybe the doomsayers have it all wrong. Shuttering failing anchors and recapturing under-utilized space could unleash the opportunities needed to revitalize retail mixed-use development and improve profitability now and in the future. Following are just a few ways lights out at department stores can mean a brighter path moving forward.
Breaking it up. Many developers are already breaking up anchor spaces to attract a variety of smaller tenants and, in the process, charging higher rent. In some cases, the new leases triple or even quadruple the rate department stores previously paid. For example, Seritage Growth Properties, a real estate investment trust (REIT) spinoff from Sears Holdings, has been gradually re-developing space once occupied by the department store at an average base rent of $4.40 per square foot and re-leasing it to replacement tenants for more than $18.00 per square foot, according to a report by commercial real estate services provider JLL.