Losing Kmart Is Big Gain for Mall

Losing Kmart Is Big Gain for Mall By SHELLY GARCIA Senior Reporter The decision by Kmart Corp. to close its Fallbrook Center store could be a boon for the West Hills shopping complex. Granted Kmart’s departure leaves mall owner General Growth Properties Inc. with 130,000 square feet to fill, after nearly completing an arduous re-positioning and re-tenanting of the center. But the newly available space also gives Fallbrook officials an opportunity to bring in one or more additional retailers with more drawing power than Kmart could provide. “Kmart hasn’t drawn a lot of customers into their stores for quite some time, so the opportunity to upgrade the box is definitely an opportunity,” said Chris Wilson, president of Wilson Commercial Real Estate, who works with General Growth on some of its deals. Kmart, which earlier this year filed for bankruptcy, is closing nearly 300 units in its 1,900-store chain, including the Fallbrook location. The retailer has long been criticized by industry pundits for failing to establish a successful niche in the fiercely competitive discount market dominated by Wal-Mart and Target. The chain’s $37 billion in sales last year pale in comparison to Wal-Mart’s $218 billion volume. While Kmart’s discount strategy fit with the newly developed Fallbrook positioning to create a big box and off-price center brokers and others say there are many other retailers out there who can draw greater numbers of shoppers to the mall. “I think it’s an opportunity for Fallbrook and for the community,” said Ron Wood, a partner with Santa Monica-based Epstein & Associates who brokers deals for retailers including Ross Stores Inc. and Borders Group Inc. “The community didn’t need to have another low-end retailer in that market area.” The one caveat for Fallbrook, however, could be finding those alternative tenants. While retailers are continuing to expand despite the economic slowdown, brokers say the big-box sector has only a limited number of players for each category of merchandise. “The problem in our market today is in every category we’re only two deep,” said Wilson. If, for example, Barnes & Noble and Borders Books & Music already operate in a trading area, a property owner seeking a book seller would be hard pressed to find a tenant. “That said, what can they do with Kmart?” asked Bert Abel, vice president of the retail group at Grubb & Ellis. “They can do anything the market requires. It’s now simply an element of who’s not there.” Officials at Fallbrook Center said they are considering “all the options.” Kmart’s departure will not require any additional reconfiguration at the center, which began remodeling work last year with plans to transform the 50-year-old center into what it calls the largest power center in the West San Fernando Valley. “It really doesn’t have any effect on the remodel other than we need to look for a replacement store,” said Daryl Rheingans, general manager for Fallbrook. General Growth has already spent several years considering a new strategy for Fallbrook, a 1-million-square-foot complex that had become a hodge-podge of big-box and discount stores along with an enclosed mall. A redesign had to take into account neighboring upscale shopping centers within a few miles of Fallbrook and a myriad of smaller centers that had grown up in the surrounding area. Last year, when mall operators inked a deal with Home Depot Inc. for a 150,000-square-foot store and a 15,000-square-foot to 20,000-square-foot garden center, the new direction appeared to gel. General Growth signed Designer Shoe Warehouse, Linens ‘n Things, Laemmle Theatres and HomeTown Buffet, which would join a lineup that already included Mervyn’s, Burlington Coat Factory, Old Navy and Ralphs. “I think they’ve got enough critical mass at that center,” said Greg Whitney, senior associate at CB Richard Ellis. “They’ll attract somebody else to fill that space because they have a nice lineup of tenants.” Rheingans said the demolition of the enclosed mall portion of the 1-million-square-foot property is in the “final stages.” A completion date for the rest of the remodeling has not yet been set, nor has the center determined what the final square footage will be when all the work is complete. “We are currently negotiating leases that are not fulfilled yet, so I don’t have that number for you,” Rheingans said.