Sears shopping its space in area malls

By Jonathan O'Connell
Monday, May 10, 2010

By Jonathan O'Connell

Sears is no longer the dominant presence in shopping centers that it once was, but its real estate holdings still are.

As it transforms itself into more of an online seller, Sears Holdings Corp., owner of Sears and Kmart, is ratcheting up efforts to lease or sell space at existing stores across the country, creating an online registry of its properties and listing nearly all of its stores there for interested tenants and buyers.

A total of 3,837 properties are being listed by Sears Holdings through its realty company, and it is looking to sell 67 stores it closed as it moves sales online and cuts costs. It operates about 3,900 total stores in the United States and Canada.

In the Washington area, the company is marketing space in 16 suburban Maryland stores, and at another 16 in Northern Virginia. The listings include Kmarts in Hyattsville and Gaithersburg, a Sears Auto Center in Bethesda, and Sears stores in Alexandria, Fairfax, Falls Church and Manassas. There are no Kmart or Sears stores in D.C., except for a Sears appliance showroom in Tenleytown.

Though what space exactly is available at each store isn't listed, some of the opportunities are for in-store leasing, as Sears has done placing H&R Block tax prep stands in hundreds of stores and which Kmart, acquired in 2003, has done with leases for Little Caesars Pizza Stations. On April 22, Sears Holdings announced that it had signed a multi-year agreement with Edwin Watts Golf Shops to open 12 golf outlets within Sears stores, including Falls Church. The shops will range from 2,700 to 3,000 square feet and be positioned near the eletronics, tools, appliances or sporting good sections.

"Over the course of the recession, retailers, shopping centers, everyone has had to get more creative and look for more sources of revenue," said Jesse Tron, a spokesman for the International Council of Shopping Centers. He said customers frequently don't know the difference between a tenant and other Sears departments. "They basically just build out a little section of the store so you don't even feel like you're in another part of the store," he said.

A Sears spokesperson, Kim Freely, said the company had been seeking lease agreements for years but that it was receiving more and highly varied responses with its increased push for tenants. "Somebody might come to us and say we want to rent a kiosk for 400 square feet and somebody else might want to lease half the store," she said.

Leveraging its real estate assets may have helped Sears quickly increase its profits and stock price in the last year, despite closing stores. Other space being marketed by Sears are areas in "diminished" stores that have been reduced in size, and pad sites in parking lots. "We just think that we could move things around and still do our business as efficiently as we can and there could still be room for other things," Freely said.

Gary Rappaport, president of the McLean-based retail developer The Rappaport Cos., said anchor retailers like Sears or Kmart that either purchased space or signed leases 20 or 30 years ago often have broad rights to their properties and can offer competitive rates.

"All Sears is doing is taking their retail play and taking advantage of the real estate play," he said. "They're not the only ones who are doing it. But because they are someone who has a lot of older locations they can focus on it."

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