Gottschalks closures could signal a retail shift
What could take Gottschalks’ space?
The River Park store, with a showcase spot in one of the Valley’s most popular shopping centers, is considered one of Gottschalks’ prime properties.
“If any tenant wants to land in Fresno, they will land at the store in River Park,” Rollf said. “It is a successful center, has a good landlord that draws from a large trade area and is high-profile.”
Kashian doesn’t expect to have a problem finding a replacement tenant. “I’ve talked to some national retailers and some regional ones,” he said without sharing details. “I may be overly optimistic, but I don’t think I’ll have any trouble re-leasing it.”
Randy Brant, executive vice president of mall owner Macerich, says the same thing about the store in Fashion Fair, which his company owns. Gottschalks is in seven centers operated by the Santa Monica company.
“The shopping centers we have are very successful, and there are those [retailers] that want to expand,” he said.
Brant acknowledged changing trends in the industry, and he said more landlords will look beyond the typical anchor department store. “Anchors are important, but less important than yesterday because specialty stores are so strong,” he said, noting that retailers such as Costco are starting to infiltrate shopping centers.
In some places, property owners reeling from the loss of Mervyns now have to come to the grips with the loss of another major draw. Sierra Vista Mall in Clovis has an empty Mervyns on one end and Gottschalks on the other.
Greg Newman, the Clovis mall’s general manager, said he is optimistic that someone will be attracted to the center, which draws from an upscale and growing community and recently added a trendy area that includes a multiscreen theater.
The loss of an anchor tenant is compounded if it leads to the exit of smaller tenants.
The major department stores bring in traffic, and if they leave, the other businesses also suffer. Sometimes, those smaller tenants have clauses in their leases that enable them to terminate their agreements if an anchor leaves.
“Sometimes it is the first domino to fall,” said Robert Hicks, senior vice president of Marcus & Millichap, one of the nation’s largest commercial realty firms.
Johnston, the consultant from Napa, said easy credit and willing municipalities eager for sales-tax revenue helped fuel retail growth. Skyrocketing home values and a robust economy fed consumers’ appetite — and then the recession hit. People started losing their jobs, and they cut back on spending.
“There is less discretionary income,” Johnston said. “But the fundamental problem is that there is more retail space than people could support.”
Consultant Jeff Green estimates that the nation’s retail space will shrink by 20% by the end of 2010.
Shopping center owners may start getting creative. Hicks said larger buildings could be divided to accommodate more than one business, or a nontraditional tenant could sign up.
“Maybe you have a flea market in there, or you could have an indoor race track. Maybe a one- or two-year lease with no rent just to cover landlord expenses and to keep other tenants in there,” said Scott Crowle, assistant vice president of investments at Marcus & Millichap.
Hicks added, “There has to be outside-the-box thinking, absolutely.”
Manchester Center in Fresno is an example of what could come.
Once the city’s premiere shopping destination, Manchester started losing retailers that moved north with city growth. In the late 1990s, Manchester owners started moving in office tenants such as Caltrans and signed up a multiscreen theater.
Today, the mix is 60% office and 40% retail.
That diversity creates a flexibility that will help Manchester adapt to the loss of Gottschalks better than other malls, said general manager Mahieu. “Everyone is sad to see Gottschalks go, but Manchester has to move forward,” he said. “It could be a continuation of the mixed-use concept. We have the office workers to fall back on.”
Kashian is planning a mixed-use center with housing, stores and offices in southeast Fresno.
He thinks more than half of the shopping centers that contained a Gottschalks could be transformed or, in some cases, torn down.
“This is not a problem,” he said. “This is a solution.”