Sears Launches Real Estate Website

Discussion
Apr 26, 2010
Tom Ryan

By Tom Ryan

Sears Holdings Corp. launched a real estate website, SHCRealty.com, to not only lease or buy closed stores but also to lease in-store space and out-of-store property.

SHCRealty.com, quietly launched in March, currently lists 67 shuttered stores available to buy or lease. Another 3,779 stores offer opportunities to either rent space for in-store shops, lease land adjacent to existing stores, or lease land in an out lot (typically on the outskirts of a store’s parking lot).

One such in-store deal with Edwin Watts Golf Shops was announced last Thursday. Edwin Watts will operate shops inside 12 Sears locations, located near electronics, tools, and sporting goods departments.

Sears also is seeking deals with licensed businesses and "strategic partnerships to creatively reuse nontraditional space for specialty marketing opportunities," according to the website. Beyond Sears and Kmart stores, the stores available cover its auto centers, hardware stores, outlets, Sears Essentials and Great Indoors. The database is searchable by state, region, market and store.

Sears spokeswoman Kimberly Freely told the Dow Jones Newswire that people in the past had contacted Sears to create lists of available real estate opportunities and the website eases the marketing of properties.

"We’re definitely reaching out to a broader audience," said Ms. Freely. "We’ve put it online and made it more accessible."

While not unusual for retailers to look for tenants for empty stores, the size of the effort was said to be unheard of.

"I don’t know anybody who’s done it at this scale," Alan Barocas, a retail real estate consultant and former senior vice president of real estate for Gap Inc., told the Chicago Tribune. "It’s a way for them to generate revenue from their real estate. It’s purely an income stream."

On the downside, the move comes amid a depressed retail real estate market. Shopping center owners looking to fill their own under-utilized space may also block such efforts.

But analysts said the move makes more sense if chairman Edward Lampert’s long-term goal is moving Sears star brands such as Craftsman, Kenmore and Diehard online and slowly reducing its exposure to its underperforming stores. According to research firm Kantar Retail, the average sales per square foot in 2009 was $111 at Sears stores and $107 at Kmart stores versus $280 at Target and $416 at Wal-Mart.

"Sears isn’t using its space in its stores effectively," Paul Vogel, principal at Realty Development Research Inc., a retail real estate consulting firm, told the Trib. "They have more space than they need."

Discussion Questions: What do you think of Sears Holding’s real estate website? Will it be more beneficial for leasing space inside existing units, selling/leasing full stores or some other use?

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12 Comments on "Sears Launches Real Estate Website"


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Paula Rosenblum
Guest
11 years 10 days ago
I say it’s about time and hallelujah. Sears has things it does really, really well. Tools, house and garden, appliances, automotive and electronics (and maybe even soft home). But it seems to me the chain has been held hostage by the sheer physical size of its stores for a really long time. The tempation to “fill it up” is strong, even though for the most part, the company has excellent long-term lease deals or full ownership of the properties. Consistently, for as long as I can remember, the company has been unsuccessful in filling it up with women’s apparel and other “stuff” that is uninteresting and way out of its comfort zone. I’ve just kept shaking my head. The timing of this is interesting. I actually had a great customer experience at a Sears store this weekend (I’m even going to include the story in RSR’s weekly newsletter). I’ve never been a big fan, but I’m starting to think it’s time we gave Sears credit for the things it does right. I’m also giving the… Read more »
John Boccuzzi, Jr.
Guest
John Boccuzzi, Jr.
11 years 10 days ago

This is a great move by Sears and not the first time they have been involved in real estate. Early on, Sears offered houses in their famous Sears catalog. The biggest opportunity for Sears with this move is to build exciting new stores within a current Sears store. With sales per square foot so low compared to competitors, it makes sense for them to invite (lease) other stores into their space. Not only will they gain additional leasing revenue, but more importantly store traffic. In my opinion, that is the ultimate win for Sears.

Dick Seesel
Guest
11 years 10 days ago

I used the site to search the Milwaukee metro area, and found that all of Sears’ properties (including existing mall anchors, auto centers, old Kmart stores, etc.) are available for search. Does this mean that “everything’s on sale” if the price is right? Just a continuation of the ongoing narrative that SHC is more interested in maximizing revenue from its physical and intellectual properties than actually turning its core retail business around.

Gene Hoffman
Guest
Gene Hoffman
11 years 10 days ago

Sears continues to go from being a just retailer to being a realtor too. Sears, with low sales per square foot, can increase its income stream by leasing space within its stores as well as continue to peddle abandoned real estate.

David Livingston
Guest
11 years 10 days ago

First no retailer would want to lease space inside a low volume Sears store. Good idea to start unloading real estate anyway possible. Sears is going to eventually have a huge amount of dead real estate. Unfortunately, all the good deals have already been made. What is left are the distressed properties no one has approached Sears to take off their hands.

Bill Emerson
Guest
Bill Emerson
11 years 10 days ago

This is an interesting spin on a major challenge facing all 4-wall retailing. There is simply too much retail selling space (and working capital and operating expense) chasing too little demand.

After decades retail selling space growing faster than population, there is now 14 billion square feet of retail selling space and over 100,000 shopping centers of varying size and configuration. This equates to over 45 square feet for every man, woman, and child in America. In Europe, the equivalent number is around 2.5 square feet. There is a shopping center for every 3,000 Americans.

This is, by the way, not new for Sears. Remember Land’s End?

Doron Levy
Guest
Doron Levy
11 years 10 days ago

We’ve already established that their retail end is suffering and making it work is a huge challenge for Sears. Why not get into real estate? We are at the low end of the game right now so in terms of real estate investing, now is a good time. Sears is on its’ way to becoming everything but a store.

Carol Spieckerman
Guest
11 years 10 days ago

I’ve been watching Sears’ out-of-the-(store)box strategies for a few years. I thought they would be the first to start licensing their brands to other retailers after creating the $1.8 billion entity that now houses Kenmore, Craftsman and Die Hard (alas, Safeway and a couple of others beat them to the retailer-as-licensor punch though Sears caught up quickly) and have expected the real estate move. Best Buy is also monetizing real estate by setting up their own ad agency and renting all of those screens big and small within its store to brands. Going forward, the only appropriate response to “They’re focusing on everything except the product!” will be, “And?”

Ralph Jacobson
Guest
11 years 10 days ago

It makes sense for them to do this. Every part of a business needs to be managed. As we have seen in the past, one [mismanaged piece], such as real estate, can bring an entire organization to its knees. However, the challenge is to decide and accept what the organization does as its core competency; and what should be handled by external experts. This is the piece that should be evaluated in this case.

Craig Sundstrom
Guest
11 years 10 days ago

I don’t really see a downside to this move (other than the $44/mo–or whatever–to host the website) What’s remarkable, I think, is the $/sf sales figures: barely over a hundred dollars for both Kmart and Sears, whereas inline space in a typical mall does about 4 times that. To put it in perspective, a typical Kmart must generate about $5M, and a typical Sears $10-15M…about the same as an average boutique on 5th Ave (sort of a rotten apples to diamonds comparison, but still….)

Ed Rosenbaum
Guest
11 years 10 days ago

There are a lot of CFOs out there today asking their real estate directors the question, how did Sear’s do this before us?
This is going to become a spotlighted department for most large box retailers, starting now.

Doug Stephens
Guest
Doug Stephens
11 years 10 days ago
My belief is that this story really has less to do with real estate and much more to do with branding. Sears is coming to the conclusion, albeit late in the game, that its brand is beyond resuscitation. It simply doesn’t have the equity or currency required to bring people through the door and the cost to reinvent itself would be astronomical with no guarantee of success. Rather than throw good money after bad, it makes a lot more sense to treat the store not as a retail brand but simply as viable retail space that other, stronger brands can capitalize on. In taking this approach, Sears (the brand) becomes an orchestrator of store-in-store experiences, rather than a retailer in the classic sense. I believe the goal here will be to lease every square inch to other brands and in doing so, move the cost of operation over to the sub-lessees. This is part of a broader trend that I dubbed “aggregation” in an article earlier in the year (see post here: http://tinyurl.com/y9noz5h) My feeling… Read more »
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