How Forever 21 Can Cash in on Sears' Real Estate Scheme
Eddie Lampert's seemingly harebrained schemes keep us pretty busy here at BNET. In the last few months, Sears' (SHLD) chairman has dished up everything from home delivery to an Amazon-like online marketplace in order to take the retailer into the 21st century. But now that Forever 21's eyeing a piece of Sears' space in the South Coast Plaza mall, Lampert's real estate plan may get some traction.
The LA-based fast fashion mega-chain is on an expansion run of epic proportions. Pushing its lightning quick inventory turnovers into Japan and the U.K., Forever 21 is also fearlessly going full-steam ahead Stateside, too, snapping up sprawling locations where others such as Circuit City have closed shop.
But the upscale Costa Mesa, CA shopping center had thus far managed to thwart the advance of taxi-cab yellow shopping bags stuffed with $4 bangles and $6 t-shirts -- even though it currently plays home to Forever 21's biggest cheap chic competitors: H&M and Zara.
However, Forever 21 didn't give up. When Sears jumped into the online real estate market earlier this year and filed plans with the Costa Mesa Planning Department to reconfigure some of its main building's vast 300,000+ square feet of space and create a new mall entrance and retail store, Forever 21 was waiting.
It had much to choose from. SHCRealty.com has a sizable inventory of shuttered stores available for purchase or lease and over 3,000 offering "operating opportunities," such as renting space for in-store shops. Though Forever 21 says the deal is not final, execs did admit to being in negotiations for 40,000 square feet of selling space that will be completely separate from Sears' appliances, auto center, and the like.
Even if the whiff of power tools comes through the door, Forever 21 could have a plum shop in its portfolio. Though roughly half the size of its latest outlet in Los Cerritos, this new Forever 21 should do a brisk business with South Coast Plaza's 23 million browsers and buyers. These are affluent buyers , accustomed to trawling the likes of Prada and Henri Bendel (M). They'll certainly have enough cash to plunk down for a pair of $20 jeans (or three).
And Forever 21 may actually wind up paying less for leasing space from Sears directly instead of from the mall owner. As one of South Coast Plaza's first tenants, Sears purchased close to 850,000 square feet of space at the shopping center, or a little more than one-third of the entire place. While it certainly can't unload all of that (even if it wanted to), Sears would do well to roll out the red carpet to hasten negotiations with Forever 21. If nothing else, maybe the proximity to a successful chain will help Sears figure out how to up the appeal of its latest apparel initiative.
Image via Flickr user Jeff Sandquist CC 2.0
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