It looks like the era of the big box department store is over for more than a dozen ex-Target Canada locations unable to find tenants after the U.S. retailer bolted back over the border earlier this year.
RioCan Real Estate Investment Trust, one of the biggest mall landlords in the country, said Tuesday it plans to divide as many as 19 former Target department stores into smaller formats in a bid to attract new occupants.
“For most of the disclaimed Target Canada leases, it is unlikely that a single tenant will be found to utilize the entirety of such space,” RioCan said in a statement. “Consequently, there will likely be a need to break-up the space.”
RioCan is still owed tens of millions of dollars in back rent and other related obligations from Target, which exited Canada in April. The mall owner is currently negotiating with the retailer on a settlement, RioCan said.
MORE: Complete coverage of Target Canada’s historic collapse
Caution
Retail analyst Doug Stephens said retailers remain cautious about expanding their footprint, anticipating a long-awaited slowdown in consumer spending as consumers come to grips with heightened personal debt levels.
“It speaks to a greater general level of caution among retailers to take more space due to a softening consumer economy,” Stephens, founder and principal at Retail Prophet, said. Target’s best locations have been picked up by Walmart, Canadian Tire and others, leaving less desirable ones vacant.
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Stores are also shifting more resources into expansion efforts online as the opportunity there grows at a faster rate than traditional bricks-and-mortar retail, Stephens said. “While still a much smaller percentage of total retail, online sales are growing at a consistent double-digit pace, while physical retail growth remains in the low single digits.”
MORE: 5 reasons why retailers may be gun-shy about former Target stores
Smaller interest
There appears to be interest in the smaller-store concept RioCan is mulling: The company said Tuesday it’s in “active discussions” with possible tenants, “and is experiencing good momentum in its leasing efforts to backfill the vacant premises.”
It didn’t say how many units the former Target locations, which can reach more than 100,000 square feet in size, would be subdivided into.
“Over the long run, RioCan believes that the re-tenanting of the larger Target boxes will result in a more diversified revenue stream and a better draw for consumers,” the company said.
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