SEARS AND K-MART ARE CLOSING. IS THERE A SILVER LINING?

Sears at the Miller Mall Mall |  MPR News

Sears at the Miller Mall Mall | MPR News

A closing is never good news, let alone two announced in a single day.

That's what happened yesterday when Sears Holdings announced that not only would the Sears location at the Miller Hill Mall be closing, but also the K-Mart in West Duluth on Central Avenue.

The two closings will result in a loss of a number of jobs in the city and will also introduce nearly 200,000 square feet of available retail space into the Twin Ports market.

Sounds terrible, right? Here's why you might want to begin looking at these closings a little more lightly. There's a silver lining, even if it doesn't seem that way at the moment.

Sears

Sears originally opened their Miller Hill Mall location in 1986. The store is a single level space that covers around 110,000 square feet and has entrances from both the mall and parking lot. That's quite a bit of space when you consider the mall itself is only about 830,000 square feet in size.

An interesting fact about the Sears space is that Sears Holdings actually OWNS the store and the land underneath, meaning they control the exterior, interior, and the surrounding parking area. Today the site is estimated to be worth around $3.6 million. 

Now, let's talk about why Sears owning the land is a good thing. It means they have to sell. Selling could mean to another retailer, which is probably unlikely as most retailers these days are not tending to make investments in real estate, or it could mean selling the space to Simon Property Group, the owner of the Miller Hill Mall.

$3.6 million is a small investment for a company like Simon. In addition, buying the former Sears space would allow the mall to take over more retail space and expand the mall which is currently near full occupancy (minus a few small retail spaces).

So, what would Simon do with the space if they did happen to buy it?

The options are endless.

What would most likely happen is that Simon would redevelop the space into more retail space, similar to what they did about a decade ago when they redeveloped the former Walgreen's space at the front of the mall into a number of different retail spaces. This would result in an updated exterior, new parking lot, and a number of new retail spaces (H&M there'd be room for you too).

Another option is that the mall could try to reposition the space as something entertainment related, a huge trend with redeveloping malls lately. That could mean a entertainment center of some sort, like Dave and Busters, or a movie/dining experience such as Alamo Drafthouse.

Lastly, the mall could try to subdivide the space or lease the space out to another large retailer. Believe it or not there are still some big box retailers that are still expanding and waiting for space like this.

In addition, if the mall is touching the Sears end maybe this will be the time for a full mall renovation. Simon is known for completing full renovations of malls while repositioning vacant anchor spaces.

Kmart.png

What about Kmart?

The closing of Kmart is without a doubt a major hit to the West Duluth neighborhood. It introduces a major void to the surrounding community which will lack a general merchandise retailer (i.e. clothes, food, household products, in one place) that is easily accessible. Another problem is that it introduces around 80,000-90,000 sqf of new retail space to the area.

But wait, is that a problem?

It might not be as the space being introduced is perfect in size to house a single or multiple retailers and is in a great area.

Some retailers that could set up shop in the space that come to our mind are Aldi, which has been actively scouting for another location in Duluth, or something along the lines of a small format Target. Target has been opening a number of small format locations across the country recently with a number of them being in former Kmart locations that have recently been vacated. 

While the closure will certainly cause disruption to the neighborhood, a silver lining is surely in store (literally). Now we're just playing a waiting game. DTA, can we get some more transit options to over the hill for the time being?

SEARS HOLDINGS LISTS DULUTH PROPERTIES

Sears has made three new "opportunities" available within the Twin Ports for retailers, developers/investors, and real estate brokers.

Sears Holdings Corporation, the real estate portion of the Sears/K-Mart company, has made available last three properties within the Twin Ports. This includes their 86,611 square foot K-Mart store at 215 North Central Ave in West Duluth along with their 98,938 square Sears store and the attached 9,131 square foot automative center at the Miller Hill Mall.

Throughout the state of Minnesota Sears Holdings has listed 11 K-Mart stores, 2 K-Mart Automotive Centers, 10 Sears stores and 10 Sears Automotive centers as available. Overall 33 properties were made available within Minnesota, one of those properties being the Sears flagship location at the Mall of America.

Available Sears Auto space highlighted in red

A CHANGE IN THE RETAIL GAME

As competition from online retailers and new retailers heats up Sears and K-Mart have seen a continued decline. This has resulted in a number of closings in the past few years with one of those being the K-Mart location near the Miller Hill Mall (now a Hobby Lobby and soon a PetSmart). More recently the company has begun to re-evaluate their company's real estate to see which properties the company can relieve themselves of resulting in large savings.

In some locations across the country Sears is downsizing their stores, many of which are over 100,000 square feet, to around 40,000 square feet leaving the rest up for redevelopment.

In some cases British retailer Primark is snatching up the extra space and opening some of their first locations within the United States. In others cases malls are using it as an excuse to expand their retail offerings with new retail space along with renovations.

NOW WHAT ABOUT DULUTH?

With the K-Mart space being listed in West Duluth it implies that that store would close. There is a chance the a real estate company could purchase the space and rent it back to K-Mart which would relieve Sears from a number of costs associated with owning a building rather than leasing it.

If K-Mart does close, it would be the biggest retail space to become available in the West End in decades and it would be a prime opportunity for a redevelopment and re-positioning of the Spirit Valley Shopping Center.

At the Miller Hill Mall the closing of Sears would be a major hit... or a major gain depending on the way you look at it. While the automotive center seems like it might be a little tougher spot to fill at it sits at the back of the mall, the Sears space is another story. 

You might not have noticed it but there is a MAJOR lack of space at the Miller Hill Mall recently. The downsizing of Sears or a closure could result in a huge opportunity for the Miller Hill Mall to expand it's retail space. 

All three spaces are available for inquiries here. In the future when more information becomes available on the potential future uses of these spaces you'll be able to find it right here on CDINDULUTH!