The Bones of a Department Store Make a Perfect Wholesale Club
When a Sears or a JCPenney closes, what gets left behind is not just empty retail square footage – it is a specific kind of real estate that most retailers cannot use. The floor plates are enormous, typically 80,000 to 200,000 square feet. The ceilings are high. Loading docks already exist. Parking lots built for peak holiday traffic sit mostly empty. For most specialty retailers, this footprint is a liability. For wholesale clubs, it is almost exactly what they would build from scratch.
That alignment is driving a quiet but accelerating trend across American retail real estate. Costco, BJ’s Wholesale Club, and a growing number of regional warehouse-format grocers are absorbing shuttered anchor spaces in strip malls and enclosed malls at a pace that has picked up noticeably as the department store sector continues its contraction. The math works on both sides of the transaction: landlords desperate to replace lost anchor tenants get a creditworthy replacement; warehouse clubs get pre-built shells in established, high-traffic corridors without the cost of greenfield development.
This is not charity from either party – it is a structural overlap that the retail industry is only beginning to fully exploit.
Why the Physical Match Is Nearly Perfect
Department stores were designed around a retail logic that no longer exists: vast selling floors organized by brand, wide aisles for leisurely browsing, multiple escalators serving three or four levels. What they left behind, after that logic collapsed, were buildings that looked wrong for almost any other use. Restaurants cannot fill 120,000 square feet. Fitness studios can use maybe 20,000. Even grocery chains found the spaces too deep and the ceiling heights too dramatic for their standard layouts. The spaces sat empty, sometimes for years, dragging down surrounding tenant traffic and depressing rents across entire centers.
Wholesale clubs, by contrast, operate on a model that actually demands those dimensions. The warehouse format requires ceiling clearance for steel racking systems that run 20 feet high or more. Wide column spacing – which department stores have because they were built for open selling floors – is essential for forklift movement between product bays. A loading dock capable of receiving semi-trailer deliveries several times per day is a baseline requirement, not an upgrade. Single-level layouts, common in many strip-anchored department store locations, eliminate the vertical inefficiency that makes multi-story retail spaces so difficult to convert. On a checklist basis, a dead Bon-Ton or Mervyn’s location reads like a wholesale club site plan.
The conversion costs are still significant. HVAC systems designed for climate-controlled retail shopping are not the same as industrial-grade warehouse ventilation. Lighting grids need to be reconfigured for high-bay racking. Refrigeration infrastructure for bulk fresh and frozen food sections requires major electrical work. But those costs are measurably lower than ground-up construction, and in markets where land is constrained – dense suburban corridors in the Northeast, infill locations in California, established commercial strips in the Mid-Atlantic – the existing footprint is worth more than the renovation bill.
The Real Estate Economics Driving the Deals
Commercial landlords sitting on vacant anchor boxes have been under significant financial pressure. An anchor vacancy does not just mean one empty space – it typically triggers co-tenancy clauses that allow smaller tenants to reduce their rent or exit their leases entirely. A single department store departure can cascade into a wave of small-shop vacancies across an entire property. Replacing that anchor, even at reduced rent, stops the bleeding. A wholesale club signing a 20-year lease with renewal options does more than fill square footage: it functions as a traffic engine. Warehouse club members make regular, high-frequency visits and tend to spend long periods on property – a behavioral profile that benefits every other tenant in the center.
For the wholesale clubs themselves, the calculus is about market saturation strategy. BJ’s Wholesale Club, which operates primarily on the East Coast, has been explicit in investor communications about targeting existing real estate rather than raw land as its primary expansion path. Costco, which historically built most of its locations from scratch, has also moved toward opportunistic conversions in markets where suitable land is no longer available at acceptable prices. The shift is partly about economics and partly about speed: converting an existing structure can shave 18 to 24 months off a typical new-build timeline, which matters when a competitor is eyeing the same market. It is also worth noting that distressed commercial properties have been attracting interest from institutional capital – as sovereign wealth funds circle distressed U.S. commercial properties, the competition for well-located anchor boxes may intensify, potentially driving up acquisition costs for retailers that move slowly.
Regional variations matter here. In the Sun Belt, available land is still relatively accessible, and ground-up construction remains common. But in older commercial corridors in New England, the Midwest, and parts of the Pacific Northwest, the pipeline of suitable greenfield sites has largely been built out. The available inventory of large retail boxes, by contrast, has been growing steadily as department store chains continue closing locations. That supply-demand dynamic makes the conversion opportunity larger in exactly the markets where organic expansion would otherwise be most difficult.
What This Means for the Shopping Center Landscape
The broader implication is not simply that wholesale clubs are growing. It is that the American shopping center is quietly reconfiguring around a different anchor model – one where the traffic driver is not a department store selling aspirational fashion but a membership warehouse selling 48-count paper towels and 5-pound bags of almonds alongside name-brand electronics at thin margins. Whether that trade is a permanent settlement or just the most plausible option available right now is a question the industry has not fully answered.
The tension sitting underneath all of this is e-commerce. Wholesale clubs have shown more durability against online retail than most brick-and-mortar formats, largely because the in-store experience – the treasure hunt element, the food court, the sheer scale of the buying trip – is difficult to replicate digitally. But that durability is not guaranteed in perpetuity, and a retailer that has just signed a 20-year lease on a converted Sears in suburban Ohio is making a long bet on a format that is currently winning, not necessarily one that will still be winning in 2040. The empty anchor boxes are getting filled. The question of what fills them next has not come up yet.
