How Retailers Are Inviting Other Stores To Take Their Spaces

Empty nesters often downsize into space better suited to their new needs. So do ailing department stores that sit empty because of new competition and the rise of digital shopping. Last month, Macy’s Inc. announced it was forming a strategic alliance with Brookfield Asset Management to increase the value of its real estate portfolio. That portfolio is getting trimmed as falling traffic means fewer bricks-and-mortar stores. Macy’s — similar to Sears — suddenly is taking on more the role of landlord than department store. Both are looking to profit by inviting other retailers — and even new-concept department stores — into their old spaces. “It’s part of a long-term shift as the department store struggles to be more relevant,” said Eric Rothman, portfolio manager at CenterSquare Investment Management in suburban Philadelphia. “They need to close stores in unprofitable locations, and a big part of their value is the real estate. They can sell, re-lease or reinvigorate these properties to free up capital” with the aid of real estate firms. Soon after Christmas, the parent of Macy’s and Bloomingdale’s is expected to identify the 100 Macy’s stores that will close in early 2017 — on top of 38 that closed earlier this year. Macy’s knows much of its inventory sits on prime real estate, and it has to better manage its remaining stores. Enter Brookfield, which has experience in managing assets in retail, office, multifamily, industrial and hospitality. Under the partnership, Brookfield has exclusive rights for up to 24 months to create a “predevelopment plan” for each of about 50 Macy’s stores. The retailer can add stores and land to the deal. Partnering with Brookfield “is the best way to unlock the potential of those assets,” said Terry J. Lundgren, Macy’s Inc. chairman and CEO. Read more at Post Bulletin.