Business

Forever 21 in San Luis Obispo to close after holidays

Forever 21 in San Luis Obispo is set to close Jan. 6 or earlier, according to an email sent to San Luis Obispo Mayor Jan Marx.
Forever 21 in San Luis Obispo is set to close Jan. 6 or earlier, according to an email sent to San Luis Obispo Mayor Jan Marx. jjohnston@thetribunenews.com

Forever 21, which has anchored the SLO Promenade shopping center on Madonna Road in San Luis Obispo since 2009, is closing by Jan. 6, fueling speculation about what could open in the 120,000-square-foot space.

Forever 21 Retail Inc. plans to lay off all 72 employees on or around Jan. 6, according to a Nov. 12 letter the company sent to San Luis Obispo Mayor Jan Marx. Employees may be given the opportunity to transfer to other stores.

The letter does not give a reason for the closure, stating the store at 313 Madonna Road “plans to permanently cease all store operations ... effective on or around Jan. 6, 2016.”

None of the employees will have the right to bump or displace other employees, who are not represented by a union, according to the letter. The employees include one store manager, two assistant managers, two managers, four “leads” and 63 store associates.

Forever 21 bought the massive store and its lease from Gottschalks after that company filed for bankruptcy protection. The company’s $8.5 million bid for the San Luis Obispo building was accepted during a bankruptcy auction in 2009.

In 2014, The Kroenke Group, a Columbia, Mo.-based development firm, bought the SLO Promenade, which consists of 22 retail spaces, including Forever 21, Bed Bath & Beyond and Cost Plus World Market, according to past Tribune reports.

It also contained a Staples office supply store until June 2014. Staples had leased a 20,000-square-foot store in the SLO Promenade. That space still remains vacant.

38,000 Average size of a Forever 21 store in square feet

120,000 Size of the San Luis Obispo Forever 21 store in square feet

256,000 Size of the retail buildings at SLO Promenade in square feet

The center is the sixth largest in San Luis Obispo County, with about 256,000 square feet of retail buildings, according to a past leasing brochure from the center.

Trey Landes, a property manager with The Kroenke Group, declined to comment about Forever 21’s closure when reached by phone Tuesday.

Forever 21 Human Resources Manager Shavaun Burse, who signed the letter to Marx, also declined to comment but said she would refer a reporter’s questions to a Forever 21 corporate contact. Calls and emails to the company were not returned this week.

A few business people familiar with local commercial real estate said Tuesday that they were not surprised by the closure, given the store’s huge size. The average Forever 21 store is 38,000 square feet, according to the company’s website. The largest is about 162,000 square feet.

“They probably knew they wouldn’t be there forever,” local commercial broker John Rossetti of Rossetti Co. said.

“I think they’re interested in staying in town in a new location,” Rossetti said. “My guess is, if they found a space with a decent size, they would like to stay.”

I thought it was too big of a building for them. All the same people you saw shopping on a random day would have been shopping at a Forever 21 store one-fifth the size.

Clint Pearce, Madonna Enterprises

Local developer Clint Pearce of Madonna Enterprises said he also wasn’t surprised by the closure, based on the number of shoppers he had seen there.

“I thought it was too big of a building for them,” Pearce said. “All the same people you saw shopping on a random day would have been shopping at a Forever 21 store one-fifth the size.”

Pearce said that off-price and discount stores have seen better sales than full-line, full-price stores, which he thinks could affect what replaces Forever 21.

Rossetti said he thought the site might work better with two or three different spaces for multiple stores instead of one roomy building.

“I think that would attract a decent number of tenants and a larger pool to draw from,” Rossetti said. “They could also potentially do a little better in rental income.”

That would take some renovation but not a destruction of the building, Rossetti said.

The Forever 21 site is zoned retail/commercial, allowing a “wide variety of types of retail uses,” said Michael Codron, San Luis Obispo’s community development director.

The city doesn’t plan to target any particular businesses for that site, Codron said.

“The city markets itself as a great place to live, work and play but doesn’t run any incentive programs to target specific businesses,” he said.

Cynthia Lambert: 805-781-7929, @ClambertSLO

Nick Wilson: 805-781-7922, @NickWilsonTrib

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