JCPenny recently announced plans to close down 40 stores by April and many landlords are preparing to profit off of the vacant space left by the big box retailer. These closings represent 4 percent of the department store’s total U.S. footprint. The announcement has presented many landlords with the opportunity to boost profits through redevelopment of the once occupied space.
CBL & Associates Properties, who will see four JCPenny locations within its portfolio close down, fully anticipated the announcement and has already begun preparing plans for the redevelopment of the vacant space left by the retailer. The company believes they can generate higher traffic and productivity by adding new stores and restaurants where the JCPenny stores once were. This is familiar territory for CBL, as they added or redeveloped more than 25 anchor and junior anchors to its portfolio in 2014, two of which being former JCPenny locations. "These closures will allow us to take space that is underperforming and convert it into fresh new retail, driving increased traffic, sales and growth to the entire property as well as generating strong returns,” said Stephen Lebovitz, President and CEO of CBL. Similar projects taken on by CBL have required an investment of $3-$10 million, generating initial unleveraged returns of 7-10 percent and taking 1-2 years to complete.
However, don’t take the store closings as a sign of doom for JCPenny. According to CEO Myron E. Ullman III, the department store saw a healthier-than-expected holiday sales season. The retailer is hoping for continued healthy growth, expected to report fourth-quarter comparable-store sales of 2-4 percent.