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Wednesday, Mar 27, 2024

Smaller Centers Grapple With Closure of Retail Chains

Smaller Centers Grapple With Closure of Retail Chains By SHELLY GARCIA Senior Reporter The new owners of the Brown Center in Tarzana barely had time to toast the close of escrow when Toys ‘R’ Us Inc. announced that it would close 36 Imaginarium stores, a move that plucks one of the most prominent anchors and a centerpiece of the Tarzana Business Improvement District from the complex. Imaginarium is one of at least three national and regional chains that have closed or consolidated in the past year or so, effectively shuttering about two dozen store units mostly in smaller shopping centers around the San Fernando Valley. While center operators insist that these closures are part and parcel of a continually churning retail landscape, there is increasing evidence that the recent events are a sign of a more long-term trend. “The box market of stores between 25,000 and 40,000 square feet is slow and steady, but not really exploding,” said Chris Wilson, president of Wilson Commercial Real Estate, a real estate brokerage that specializes in retail properties. “And the only places where those tenants are aggressively pursuing sites is in major power centers that have a Kohl’s, Wal-Mart or a Target.” Shopping centers are continually evolving as retail trends come and go. But the growing dominance of these major discount chains along with the consolidations among other retailers has made business more challenging for smaller complexes. “I think what you’re seeing is further consolidation of retail sold at fewer locations that are more super-store oriented,” Wilson added. Just days after the announcement of the closure of Imaginarium, which will also affect The Commons at Calabasas and a smaller strip center in Studio City, FAO Inc. announced for the second time that it would file for bankruptcy protection and could close its remaining FAO Schwarz, The Right Start and Zany Brainy stores before year end. Earlier, Strouds Acquisition Corp. liquidated its linen stores; Wherehouse Entertainment Inc. shuttered the majority of its 400 units, Best Buy Co. closed down about 150 of its Musicland division units, including Sam Goody stores, and Kmart Corp. and J.C. Penney Co. Inc. both underwent considerable downsizing. The closures hit a range of centers, from enclosed malls like Glendale Galleria, which lost its FAO Schwarz and Zany Brainy stores, and Westfield Shoppingtown Topanga, which lost a Right Start; to Laurel Promenade in Studio City which once housed a Wherehouse unit, and Ventura Boulevard, where Strouds had two locations, in Studio City and Encino. Some of the spaces, such as those at Glendale Galleria and Shoppingtown Topanga, were quickly filled again. But finding new tenants has taken longer for others, particularly the smaller complexes. Vacant sites At Laurel Promenade, where the Wherehouse closed about one year ago, a new tenant has not yet been signed. The Strouds Studio City site also sits vacant. It was two years before Imaginarium was signed to replace a vacancy left when Limited Brands decided to close two of its freestanding store units in the Brown Center. “We had offers on the space, but they weren’t the right offer for the mix we were looking for,” said Brad Pearl, vice president of leasing and acquisitions at Newmark Merrill, the former manager of the Brown Center. “There’s no doubt from a leasing standpoint a lot of work goes into every lease we sign and a lot of scrutiny. We’re certainly not happy about the situation, but we understand.” Some center operators say the continual churn of retailers can often present opportunities. When JC Penney and Kmart left Fallbrook Center, it gave the owners an opportunity to completely overhaul the mall, bringing in Kohl’s and Home Depot, among other stores. And when FAO Schwartz left Glendale Galleria, it presented a perfect opportunity to bring in Talbott’s, a store the mall had been courting for some time, said Janet LaFevre, senior marketing director for the Galleria. “The last couple of years have been kind of challenging, but there is always a normal cycle of new concepts coming forward and old concepts fading away,” said LaFevre. Most center operators say they need a solid roster of national retail chains because it helps with financing terms, but, especially where smaller malls are concerned, having a mix of independents can also help differentiate the center. Those stores are not always easy to lure they don’t expand at the rate of the chains and they are in high demand. “They’re tough to get,” said James Ashton, president of AFC Commercial Real Estate Group, which has represented the Commons and The Grove, among other centers. “Eveyone wants them so they’re not paying big rent and they’re getting a lot of tenant allowance. But if we can fill up 25 percent with that unique tenant from New York or San Francisco or Laguna Beach, that’s what makes it.” Upgrade planned The new owners of the Brown Center share that outlook. “Whatever happens at Imaginarium is not going to affect our plans,” said Bryan Gordon, CEO of Pacific Equity Properties Inc., a Santa Monica-based developer that closed escrow on the Brown Center about two months ago. “We’re looking to upgrade the tenancy, not only with national credit tenants, we’d like a mix of local tenants as well.” Gordon said he envisions more of a lifestyle approach for the 85,000-square-foot center, with restaurants and other areas to congregate. Although he wouldn’t say how much, Gordon added that the company is prepared to make an additional investment into renovating the center. “Imaginarium departing sooner than anticipated would probably partially bring forward that phase,” he said. Tarzana’s Business Improvement Association is also optimistic about the opportunities that may result from the closure of Imaginarium. “Wal-Mart had 20 percent of sales in the first week of holiday shopping,” said Greg Nelson, president of the Tarzana Business Improvement Association. “How do you compete with that? I’m hoping the BIDs are able to compete because they’ll have some stores with character.” To some degree, the stores that are now closing reflect categories that have passed their prime on the retail scene. The lion’s share of toy sales have moved to Wal-Mart and Toys ‘R’ Us, and the emerging category of electronic and digital toys are now being sold at stores like The Sharper Image and Radio Shack. Likewise, the rise of the Internet has taken its toll on record sales and, with them, record stores. “Look at record stores,” said Michael Lushing, senior leasing manager for Westfield Corp. “For forty years, record stores were huge. They’re all gone. Between downloading music or buying stuff at Wal-Mart and Target, these guys have no chance.” Meanwhile, new categories are emerging and expanding. The Galleria has added several personal care stores like L’Occitane that sell fragrances and lotions, and at Shoppingtown Topanga, the former Right Start space will be taken over by an extension of Victoria’s Secret devoted to beauty products. “The players change,” said Lushing. “It’s categories that didn’t exist before that exist now and categories that were there five years ago are gone.” Shifting Retail Landscape Some of the store groups closing. Parent Unit Toys ‘R Us Imaginarium Kids ‘R Us FAO Inc. Zany Brainy FAO Schwarz The Right Start Best Buy Co. Sam Goody

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