Sears stores close, company enters bankruptcy

On Behalf of | Oct 17, 2018 | Real Estate Transactions

Sears, a popular home goods store and retailer, is going through bankruptcy. As they go through bankruptcy, it could impact mall owners and other businesses, since Sears often has large stores in these shopping centers.

Sears filed for Chapter 11 protection on Oct. 15, seeking to reorganize its assets and continue on as a business in the future. Mall owners who rented spaces to Sears have been left with store closings and difficulty finding new tenants. With so many store spaces opening up, it could be difficult. It’s believed that the bankruptcy could end up opening up over 100 million square feet of retail space, which has to be filled in some way.

Most Sears stores are found in regional malls, as of a 2017 report. In high-end malls, the bankruptcy is almost seen positively. Although a hassle, the owners can rent the space out to new tenants who may pay top dollar. Sears stores usually pay around $5 per square foot, while average rents for top-dollar malls are a shocking $50 to $60 per square foot.

This is an opportunity to raise the rent, but it could also mean a loss for some malls. Sears, after all, is such a big store that it would be nearly impossible to find a tenant to fill the space. Add to this the fact that many Sears spaces are owned by Sears and have to be sold before they can be filled and you see the true impact its bankruptcy has.

When one business goes out of business or goes through restructuring, it impacts everyone. This is a prime example of why it’s important to closely monitor the market.