Why is downtown Sacramento Macy’s closing? What’s next for building? Experts weigh in
The impending closure of Sacramento’s downtown Macy’s store last week confirmed a long-rumored move by the company.
Nearly one year earlier, an official from one of the region’s key business groups said during a public meeting that he believed the store was on a trajectory to close. Members of the business community have since spent months speculating about the future of the property.
It’s unclear what ultimately sealed the longtime department store’s position on the company’s latest round of closures, announced Thursday. The company said the move was intended to return Macy’s to sustainable growth by closing “underproductive” stores. What is clear, experts said, is that customers’ habits have changed dramatically over the past five years. Downtown malls, broadly, are struggling to compete with upscale, suburban retail centers. And while Sacramento’s downtown foot traffic has improved markedly since the pandemic, it remains below 2019 levels.
“People aren’t downtown the way they were, and they aren’t shopping the way they were,” said Will Austin, director of market analytics for CoStar in Sacramento. “And urban centers aren’t a great location for department stores right now… Especially in markets like Sacramento, where so much of it is suburban-focused.”
At the same time, Macy’s was facing pressure from activist investors, which pushed for the company to reorganize its real estate portfolio.
The investors — Barington Capital Group and Thor Equities — said in early December that they believed Macy’s real estate assets were worth between $5 billion and $9 billion, and argued that the company should spin off its real estate into a separate entity that would collect rents from Macy’s retail operations and pursue sales and redevelopment opportunities. It would mimic a similar move by Sears, a decade earlier, when it separated its real estate portfolio into a new firm called Seritage Growth Properties.
Last week Macy’s announced 66 sites that would close, signaling the end for the longtime department store that served as a defining characteristic of a section of downtown, even as the area has been reimagined over the decades.
The city brought Macy’s downtown in 1963, and it anchored an earlier, smaller iteration of the Downtown Plaza that opened in 1971. In 1993 the mall underwent a $157 million revamp that doubled its size, drew shoppers and upscale stores.
The mall’s sales dropped in the early 2000s. The recession contributed to its slump, as did competition from retail centers elsewhere in the region. (The owner at the time, Westfield Group, was accused of investing more heavily in its Roseville center.) The real estate lost value, and in 2012 was purchased by JMA Ventures for $21 million.
The Sacramento Kings stadium was completed in 2016, and nowadays many of the tenants within the Downtown Commons are experiential businesses, like mini golf, or bars and restaurants that draw traffic from Sacramento Kings games, Austin said.
The Macy’s property is a prime space, said Sanjay Varshney, founder and principal of Goldenstone Wealth Management and a finance professor at Sacramento State. A creative developer could take advantage of the opportunity — assuming there’s demand, he added. Some downtown commercial properties have sold recently for 20 to 40 cents on the dollar.
“That just shows, the headwinds are pretty strong,” Varshney said.
Macy’s did not address questions about the company’s plans for the building. The company did not provide an exact closure date for the store, but spokesperson Orlando Veras said in an email Tuesday that a clearance sale would begin “soon” and run for eight to 12 weeks, suggesting the store will remain open into early March or early April.
Austin, the real estate analyst, said the site could be an opportunity for another hotel — something the city’s tourism agency has called for.
“My money is not on another retail concept,” he said.
Barry Broome, president and CEO of Greater Sacramento Economic Council, said during a Feb. 27 city council meeting that the downtown Macy’s store would shutter, though at the time the company said it hadn’t yet determined which locations would close.
“You could see it was heading for a wind-down,” Broome said Monday.
In the future, he thinks there may be some type of mixed-use development at the site, whether that includes a hotel, restaurant or housing.
“I think it will be redeveloped. I think when it’s done it’ll be a better asset,” he said. “It wasn’t positioned to succeed.”
He called for the city to incentivize the site’s development, the cost of which will likely rise into the hundreds of millions.
“These aren’t small numbers,” Broome said, “and you have to incentivize people to invest in your community.”
This story was originally published January 14, 2025 at 5:00 AM.
