Are Real Estate Developers Shutting Down Fry’s Electronics?
Since the Palo Alto store closing announcement in September 2019, I have made eight videos about Fry’s Electronics being a zombie retailer. Empty parking lot, barren shelves, few customers, and the salesclerks unhelpful as always. The chain is still open during the coronavirus pandemic with curbside pickup, local deliveries and online orders in Las Vegas and the San Francisco Bay Area.
I mentioned in some videos that I thought real estate developers would dictate future store closings.
- The Duluth, GA, store closed last November because the developer turned the property into a previously owned car dealership.
- The Palo Alto, CA, store closed last December because the developer and the city slated the property for mixed development.
- The Anaheim, CA, store closed in March because a developer bought the property.
- The Woodland Hills, CA, store is still open while the property is under consideration for mixed development.
This week The San Jose Mercury News reported on a developer’s proposal to turn Fry’s Electronics’ San Jose store, warehouse, and corporate headquarters into a multi-building tech campus for 10,000 employees.
This wasn’t the first developer to take an interest in Fry’s Electronics corporate headquarters.
The San Jose Mercury News reported in January that Prologis, a developer of warehouse and logistics buildings, was seeking to change the existing zoning from “planned development zoning” to “combined industrial and commercial”. (They were the developer that prompted the closure of the Anaheim store.) Their inquiries with San Jose city officials was to subdivide the property and figure out what they could build at that location.
The 19.7-acre property has an overflow parking lot that is big enough for an office-and-warehouse building that’s common in the area. Based on the pavement markings in the overhead picture of the site, several buildings may have existed before being torn down and paved over.
Fry’s Electronics doesn’t have enough vehicle traffic to fill out the parking around the existing building much less the overflow parking. The last time I parked in the overflow parking lot was probably 15 years ago when standing in line for two hours was a Black Friday shopping ritual in Silicon Valley. They haven’t had a two-hour line on a Black Friday in years.
Subdividing would help the property owner, Caracol Limited, earn income on the unproductive space. Either selling the subdivided property outright or leasing it to the developer. The general partner for Caracol Limited happens to be a Fry’s Electronics founder, David Fry. As far as I know, the San Jose store is the only location where a founder also owns the property.
Bay West Development has filed a proposal with the city for a tech campus of seven office buildings and two parking structures. An additional two million square-feet of office space that could accommodate 10,000 workers for an unspecified tenant. Construction would take place in three or four phases.
Two interesting facts stand out from the article.
- Prologis never followed up after inquiring with the city in January.
- Bay West Development has an ownership stake in the property.
If the city approves the proposal, Bay West Development may have a better shot at getting this done.
Would Fry’s Electronics close its signature store, warehouse, and corporate headquarters?
- As a zombie retailer in the middle of a pandemic, it has nowhere to go but down in this uncertain economy.
- For the property owner, redevelopment is probably the best option and a good long-term play.
- With a founder being owner of both, the San Jose store will certainly close, inventory ship to other stores, and the corporate office relocate to a different store.
With 29 other stores on over-sized and underused properties, real estate developers will continue to shut down Fry’s Electronics.