J.C. Penney at Victoria Gardens in Rancho Cucamonga, CA., Friday, February 24, 2017. (Staff photo by Jennifer Cappuccio Maher/Inland Valley Daily Bulletin/SCNG)
By Fielding Buck, The Press-Enterprise
Posted: 02/24/17 – 9:58 AM PST |
JCPenney will close 130-140 stores in coming months and move its Southern California warehousing from Buena Park to the Inland Empire, the company announced Friday.
Locations of the stores are expected to be announced in March.
Garrick Brown, vice president of retail research for real estate firm Cushman & Wakefield, predicted that most of the closures would be in standalone stores or stores in Class C or D malls.
“Ironically, if they were closing any Class A mall locations (the ones they generally do not want to close), many of those landlords may be more amenable to getting the space back so that they could redevelop for smaller tenants who pay higher rates generally,” he wrote in an email Friday.
That is what happened at Ontario Mills, which converted 107,000 square feet once occupied by JCPenney into Fashion Alley, which opened last year. The new neighborhood on the southwest side of the mall has space for 13 retailers.
A company map indicates that JCPenney operates 79 stores in California. The pending closures represent about 13 percent to 14 percent of the department store chain’s current store count and less than 5 percent of its total annual sales.
Chairman and CEO Marvin R. Ellison said JCPenney is taking “aggressive action to better align our retail operations for sustainable growth.” The department store chain said it is initiating a voluntary early retirement program for about 6,000 eligible employees — far more than the number of full-time positions that will be affected by the store closures.
Employees in the company’s pension program who are at least 55 years of age with 15 years of service as of Jan. 31 are eligible for early retirement.
The Buena Park distribution center, at 6031 Orangethorpe Ave., was assessed at roughly $35 million last year, making it a valuable real estate asset for the troubled retailer. CoStar, a commercial real estate database, indicates the property is used as a hub for JCPenney’s West Coast operations.
Louis Tomaselli, a senior managing director at the investment management firm JLL, said the move makes sense.
“They go sell a 40-year-old facility and then they lease a brand new facility … a brand new, state-of-the-art facility, a huge truck court,” he said. “And they pay current market rates, which are well below what it would cost to operate the Orange County facility at the price level it was worth. This is happening all over Southern California.”
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