Former REIT analyst Avery: Sears' fate would have been different if it seeked bankruptcy earlier
Sears Canada’s landlords are likely better prepared to deal with the retailer’s exit after learning some hard lessons from Target’s sudden departure from the country, according to a real estate industry expert.
Numerous shopping malls could soon find themselves on the hunt for new anchor tenant if the Ontario Superior Court grants Sears Canada its request to begin the liquidation process.
However, landlords could take a different approach this time to filling the empty retail space.
“When Target closed, they had a lot of one-story boxes, they had some two-story boxes and they would try to find tenants to fit in – either one tenant to take the whole space or carve it up and make the hall a little longer going into the box – lots of different experimental techniques were attempted,” former REIT analyst Alex Avery told BNN in an interview.
“What ended up happening is that process took a fair bit longer than what the landlords had hoped it would take and in some cases it proved to be very costly even though the returns on that capital were good,” he said.
Avery says landlords have learned from those experiences and could consider full-out tearing down Sears Canada stores to start from scratch.
“That has a bunch of advantages including the fact that management teams won’t be talking about this issue quarter after quarter after quarter until these boxes disappear because if you tear it down you can get rid of the box right away.”
He says that could make way for “experiential retail” such as restaurants that will work for that real estate location longer.
“In Canada, because of the concentration of the population as well as the other retailers we’ve lost such as Eaton’s and Simpsons a long time ago, and then Zellers and Target, there’s been a lot of adaptive reuse of the retail space.”