It was just over two years ago when Target Corp. shuttered its Canadian operations and left gaping holes in dozens of malls across the country.
Now, communities are bracing for another onslaught of empty retail space as Sears Canada Inc. gets ready to liquidate 131 stores.
Nearly 50 of the soon-to-close Sears stores are in a mall or property with a former Target, according to research from Jones Lang LaSalle (JLL), adding to the glut of unwanted retail space already in the market.
"There are only so many tenants that can utilize these larger spaces and we just lost another one of these tenants with Sears," said Roelof van Dijk, senior research manager at CoStar Group, a commercial real estate data firm.
For subscribers: Who killed Sears Canada?
Target flooded the market with 14.7 million square feet of retail space when it pulled out of Canada in the spring of 2015. More than two years later, about 40 per cent of the old Target space is still vacant, according to research from CBRE. The Sears locations will dump another 15.6 million square feet in the market, said CBRE, as traditional stores buckle under the intense pressure from e-commerce giant Amazon.com.
Nowhere will it be as challenging as in smaller cities such as Corner Brook, Nfld., which is home to about 20,000 residents.
Target and Sears used to be so-called anchor stores, or key retailers that are supposed to attract customers to the mall.
"To lose two anchor tenants in our mall. That is another devastating blow," said Corner Brook councillor Bernd Staeben.
The councillor said that the mall, Corner Brook Plaza, is "quite busy," and that Sears is popular with the residents and surrounding communities. "That is why I am surprised in a way. It was one of the few places where you could get what you wanted and get the service and the delivery," he said.
There is a reoccurring rumour that Boston Pizza will lease part of the old Target. But although Mr. Staeben predicts the restaurant chain would do well, he said businesses are afraid to invest in his region. "We are so fragile and the pie is so small," he said.
The population is dwindling and the mall is competing with a nearby Wal-Mart.
"If we owned that mall, we would be saying 'Oh my god,'" said Charlie Oliver, chief executive officer with Martek, which specializes in commercial real estate in Newfoundland and Labrador.
Target had 140 stores in Canada, of which 26 had "no prospects" for replacement tenants, according to a February analysis by retail real estate brokerage Northwest Atlantic (Canada) Inc.
Part of the problem is that cities are already teeming with big-box and mid-box stores – the type of retailer that would require a lot as big as Target or Sears.
Wal-Mart, Lowe's and Canadian Tire filled some of the old Targets in places such as Nanaimo, B.C., Quebec City and Halifax. Smaller box stores, such as Marshalls, HomeSense and Winners, have leased a part of other Targets.
"The big-box market is in stagnation," said Tom Balkos, a senior vice-president and Canadian retailing expert with CBRE.
Some landlords found other options. In Saskatoon, Sask., a small part of the space was used for a Good Life Fitness centre. In Medicine Hat, Alta., the Target was turned into a food court.
But converting big retail stores into offices or housing would likely require demolishing the space. Turning the buildings into warehouses for online retailers would not use all the capacity. "I don't see them requiring big boxes yet," Mr. Balkos said.
Some of the hardest spots to rent will be in malls with the former Target and Sears. There are 48 malls or properties in Canada with both, according to JLL data. Of those, six Targets are still vacant, about 10 have leased only part of the space and a handful are being redeveloped, according to research from CBRE and JLL.
Finding the right tenants and overhauling old spaces take time. "It's a long process, a very long process," said Matthew Smith, executive vice-president of capital markets at JLL.
Even in booming communities such as in Richmond Hill, north of Toronto, it will take more than three years to redevelop the old Target space in the Hillcrest Mall. Some of the lot has been allocated to Marshalls and HomeSense, which is not due to open until the fall of 2018.
In Chilliwack, B.C., another fast growing municipality, the Cottonwood Mall has not announced a replacement for the former Target.
Mayor Sharon Gaetz said some of the space is currently being used to sell Halloween costumes, although that is not expected to be permanent. She estimates that about 80 people will lose their jobs when Sears shuts its doors. "The loss of two anchors is a huge loss," Ms. Gaetz said.
The long-time Chilliwack resident remembers ordering from the Sears catalogue and bringing her children to the mall.
Now, Ms. Gaetz watches retailers come and go. She hears suggestions for turning malls into housing or something else. "It is a question that everyone is asking," she said. "What is the future of malls?"
Rachelle Younglai