Sears Holdings Corp. said Thursday it will shutter four of its 28 Kmart stores in Minnesota, leaving real estate experts wondering how the vacant stores will affect an already-challenged retail landscape across the state.
Following a dismal holiday selling season, the Illinois-based parent of Sears and Kmart said earlier this week that it would close 100 to 120 stores nationwide. That left communities across the country wondering whether their local store was on the chopping block.
In Minnesota, Kmart stores in White Bear Lake, New Hope, Willmar and Duluth will close at a date to be determined. For the time being, none of the state's 12 "full-line" Sears stores or 41 specialty Sears outlets will be affected in this wave of consolidation.
Sears announced only 79 store closings on Thursday, so as many as 41 more stores nationwide could be closed in the future. Each store employs 40 to 80 sales associates, according to the company's website.
Sears Holdings declined to comment about the store closures.
The closing of yet another big-box retail store will likely prove challenging for Twin Cities real estate professionals trying to fill the empty space. In 2011, a tough economy spurred the closing of several stores throughout the Twin Cities, including Borders, Ultimate Electronics, as well as a Lowe's store in Rogers. A Gander Mountain store is slated to be closed in Maple Grove.
"These stores are typically not easy pieces of real estate to re-tenant," said Dick Grones, principal of Cambridge Commercial Realty in Edina and a longtime retail broker.
Kmart usually leases its space -- of its 1,278 stores nationwide, 1,101 are leased, according to a Sears securities filing. Most Kmart stores span 93,000 to 169,000 square feet, and are often in older, inner-ring suburbs.
If Kmart owns the property, "it's much easier to lease it," said Tom Martin, senior vice president of Cushman & Wakefield/NorthMarq. "If they lease it from someone else, then that could create some challenges. It's much easier to dispose of a piece of old real estate than to get someone to step in as a tenant. But it can be done."
The retailer will continue to operate Twin Cities stores in Minneapolis, St. Paul, West St. Paul, Blaine, Oakdale, Burnsville, Anoka and Monticello.
Kmart began closing many stores in the Twin Cities when it filed for bankruptcy in 2002. In some cases, these shuttered stores took years to redevelop.
Recently, Martin was involved in a deal involving a former Kmart store on Lyndale Avenue in Richfield. The store closed in 2008, and it remained vacant until LA Fitness recently announced plans to build a new fitness center on the site.
In the case of the New Hope Kmart, at 4300 Xylon Av. N., the city was already working with the Florida-based owner of the property to redevelop it and nearby lots into a mini-downtown with shops and restaurants, according to City Manager Kirk McDonald. The Kmart closing could spur those efforts, he said, "although I hate to see people lose their jobs at Kmart."
City officials from White Bear Lake could not be reached Thursday regarding the impending Kmart closing.
Sometimes large retail "boxes" that have been abandoned can be subdivided into "junior boxes," Martin said. These concepts generally span about 15,000 square feet, according to a recent report by the commercial real estate firm Cassidy Turley. The smaller spaces may be occupied by retailers such as Best Buy and Office Max looking to downsize, or others seeking to expand their footprint, such as T.J. Maxx HomeGoods and Trader Joe's.
Despite news of retail closings by Sears and Kmart, the Cassidy Turley report was fairly upbeat: "Although the economy continues to hiccup occasionally and overall consumer spending is down, retailers can be expected to continue their searches for quality locations."
That search often ends up involving existing shopping centers and malls because few new retail centers are being built, Martin said.
Janet Moore • 612-673-7752