Sears Holdings, which also operates franchises (your mom used to shop at) like Kmart and Land's End, has been in a "death spiral" for some time now, a classic victim of disruption--first from big-box discounters like Walmart, and then from the web. Sears' most recent and representative quarterly report last week showed declining margin rates, net losses of $279 million, and financial performance the CEO called "unacceptable." Now, in a Hail Mary pass, Sears is seeking to leverage one of its current liabilities--high-priced real estate, coast to coast--into a money-maker by converting old Sears and Kmart properties into data storage centers.
The department store chain owns 25 million square feet of space across 3,200 properties, with a store located within 10 miles of 71 percent of the U.S. population. With the formation of a new subsidiary, Ubiquity Holdings, Sears is seeking to outfit stores with racks of servers, forests of wireless towers on the rooftops leased to cell phone carriers, and in some cases, "business continuity facilities." This is an emerging industry, providing temporary centers of operations and data recovery services for businesses that are forced out of their offices by a natural disaster or other disruption.
The first Ubiquity conversion will be a 90-year-old, 127,000-square-foot iconic location on the South Side of Chicago, Sears' hometown, scheduled to close at the end of June. In its new life as a multi-tenant data center with racks of servers and chillers, it could produce an estimated $7 to $10 million a year in rent.
The numbers don't quite work out big enough to shore up Sears' future by themselves, but the conversion project certainly counts as making lemonade. Demand for data centers is growing, as more companies move to implement some version of internal or private cloud computing and storage. Bleak warehouses full of inscrutable technical equipment don't exactly enhance the urban fabric or create many jobs compared to retail stores. But presumably they're better for blight, and for the company's bottom line, than boarded-up buildings.