Retail landlord Macerich has new leases signed or offered out for stores totaling 3 million square feet, including several Dick's House of Sport locations, as it looks to fill vacant anchor mall spaces with new types of tenants. Two of the chain’s stores, where shoppers are encouraged to try out gear, are slated for former Sears locations.
The Santa Monica, California-based real estate investment trust offered an update on its efforts to lift occupancy at its properties and to divest noncore shopping centers when it reported second-quarter earnings Monday. Macerich owns 42 million square feet of real estate consisting primarily of interests in 39 regional retail centers. Its portfolio is concentrated in California, the Pacific Northwest, Phoenix and Scottsdale, Arizona, and the metropolitan New York to Washington, D.C., corridor.
With the demise or diminishment of a number of department store chains, retail landlords such as Macerich are hunting for new kinds of occupants to anchor malls and drive foot traffic. And it thinks that Dick's House of Sport fits the bill.
The company said its portfolio occupancy was 92% at the end of the quarter, a 1.4% decrease compared to the 93.3% occupancy as of the same time a year ago and a 0.6% decrease compared to the 92.6% occupancy in the first quarter. The drop was mainly due to the closing of Forever 21 stores in the wake of the chain's liquidation, according to Macerich.
"Macerich should be able to extract higher rents and better foot traffic from replacement tenants to the Forever 21 store closures," credit-rating firm Morningstar said in a note. "We should also see a reduced impact from these store closures on occupancy, going forward."
During the quarter, the REIT said it signed leases for 1.7 million square feet, an 137% increase in leased square footage compared to the second quarter last year, on a comparable center basis. The new deals are "double the number of leases and triple the amount of square footage that we signed during the same period last year," Doug Healey, Macerich senior executive vice president of leasing, said on the earnings call.
New store openings
He also offered Wall Street analysts a broader view of the company's leasing outlook.
"At the end of the second quarter, we had 179 leases for 1.5 million square feet of new stores, which we expect to open between now and early 2028," Healey said. "In addition to these signed leases, we currently have leases out with new stores totaling 1.6 million square feet. And these two will open between now and early 2028. So in total, that’s over 3 million square feet of new store openings throughout the remainder of this year and beyond."
Macerich announced that Dick's House of Sport had signed a lease for a 142,000-square-foot former Sears store at the Washington Square mall in Portland, Oregon. That chain is part of Dick's Sporting Goods.
"Dick’s House of Sport is an experiential retail concept that is built on the foundation of a traditional Dick’s Sporting Goods store by adding interactive elements such as climbing walls, batting cages and golf simulators ... and [it] will create a more engaging and immersive experience for customers," Healey said. "Dick's House of Sport is the epitome of destination oriented and will create a more engaging and immersive experience for customers. We expect this will totally transform the Sears wing, both in terms of better merchandising and increased traffic."
Revamping Crabtree Mall
That location is slated to open in 2027, and Macerich has more Dick's House of Sport stores coming. One is under construction at the Freehold Raceway Mall in Freehold, New Jersey, and is opening later this year, according to Healey. A third one will be coming to the Crabtree Mall in Raleigh, North Carolina, which Macerich just acquired for $290 million from Clarion Partners. That one, replacing a vacant Sears like at Washington Square, is scheduled to open in 2027.
Macerich also discussed plans to boost occupancy at Crabtree Mall. The goal is to drive permanent occupancy from roughly 78% as of March 31 to 90% by 2028 and capture upside growth potential, according to the company.
Macerich plans to invest $60 million to revamp the 1.3 million-square-foot mall. The improvements will include reimagining more than 200,000 square feet of common area, with a reenvisioned furniture package for a cohesive, elevated look; interior signage and wayfinding redesigned to create a more intuitive guest journey; updated furniture, greenery and curated planters; a revitalized food court and the addition of a family zone; and refreshed parking decks.