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Originally published August 29, 2011 at 10:01 PM | Page modified August 30, 2011 at 7:55 AM

JC Penney returning to Seattle downtown

JC Penney is returning to downtown Seattle after leaving nearly 30 years ago, becoming the latest moderately priced clothing-store chain to set its sights on a growing number of shoppers who live and work in the city's urban core.

Seattle Times business reporters

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JC Penney is returning to downtown Seattle after leaving nearly 30 years ago, becoming the latest moderately priced clothing-store chain to set its sights on a growing number of shoppers who live and work in the city's urban core.

Plano, Texas-based Penney plans to open a store in the Kress building at Third Avenue and Pike Street, a block from where Penney once had a Seattle outpost and where Target soon will set up shop.

Although Penney has yet to announce its return downtown, real-estate sources confirmed it after months of speculation, saying they were not allowed to speak publicly about the deal.

City records show the owner of the 87-year-old building has applied for a permit to change its use from office and health club to department store. Records also show a permit application was filed and quickly approved last week for interior demolition work.

Penney recently opened a smaller-than-usual store in Daly City, Calif., and has talked about plans for additional stores in the 50,000- to 60,000-square-foot range, a bit like Wal-Mart with its 15,000-square-foot Walmart Express stores, and Target with its smaller CityTargets.

"We have some smaller stores on the horizon that we'll be opening in some urban areas," Penney's outgoing chief executive, Myron "Mike" Ullman, told Women's Wear Daily last spring. "It's a function of where the customers live and what their appetite for apparel is."

Recent moves at the three-story Kress building pave the way for the type of store Ullman described. The building's health club, which occupied the second floor, relocated elsewhere downtown. Vacant offices on the third floor were listed for lease this year, then pulled off the market.

County records show each of the building's three floors is about 20,000 square feet, and part of the ground floor is occupied by other retail tenants, including a Starbucks. That means the store would be significantly smaller than a typical suburban Penney — no larger than 60,000 square feet.

The Penney store at Northgate, in contrast, is 129,000 square feet.

Spokeswoman Sarah Kelleher said only that Penney has "not announced any plans to open a store in Seattle."

Long known for selling inexpensive clothes to Middle America, the retailer had a store for about 50 years on Second Avenue between Pike and Union streets. But it closed the store in the early 1980s, saying it was too far from the hub of downtown retail activity, a stretch of Pine Street that now includes Westlake Center and Nordstrom's flagship store.

The old Penney building eventually was torn down, and the 24-story Newmark residential tower took its place in the early 1990s. Discount retailer Target plans to open a 96,000-square-foot store at the base of the Newmark next year.

Along with Target, a new Penney store downtown makes sense, given the growth in people who live and work there, real-estate brokers said.

Since 2000, the greater downtown population has risen 26 percent to nearly 60,000, more than one-third of whom also work in the urban core, according to the Downtown Seattle Association.

Susie Detmer, a commercial real-estate broker focused on the local retail sector for Cushman & Wakefield-Commerce, said Penney's return would provide more proof that the retail core is "viable for all price points," not only the upper end.

"With a huge daytime population and growing residential population," Detmer said, "the retail core is finally expanding."

Across Third Avenue from the Kress building is Ross Dress for Less, and two blocks away, at Fourth and Union, is Men's Wearhouse.

Swedish retailer H&M, known for trendy yet affordable clothes, opened in 2008 at Sixth and Pike. Los Angeles-based rival Forever 21 opened a three-level store across from Pacific Place at Sixth and Pine in late April.

And Nordstrom Rack will move next year to Westlake Center from in the Broadacres building at Second and Pine, giving it nearly one-third more selling space in the heart of the retail district.

What's more, tech and biotech firms, including Dendreon, Isilon and Amazon.com, are expanding downtown, portending better days for local retailers.

Two blocks from the Kress building, Russell Investments has about 200,000 square feet of offices formerly occupied by Washington Mutual.

Besides Northgate, the 1,100-strong Penney chain has a local presence at Alderwood in Lynnwood, Bellevue Square and Westfield Southcenter in Tukwila. Penney this month unveiled a $5 million remodel of its Northgate store, including a new Sephora boutique and updated fine-jewelry department.

Penney survived the Great Recession by cutting costs, carefully managing inventory, adding popular in-store cosmetics boutiques with Sephora, and striking exclusive deals for merchandise, such as a collaboration with Spanish fast-fashion chain Mango.

With many customers still struggling amid rampant joblessness and a troubled housing market, Penney recently posted a second-quarter profit of $14 million, the same as a year ago, while sales fell nearly 1 percent to $3.9 billion. The company ended July with $1.6 billion in cash.

"The challenging economy continues to impact the moderate consumer," Ullman said in a statement.

Ullman plans to leave Penney and be replaced on Nov. 1 by longtime Apple retail chief Ronald Johnson.

Some retailers said they had heard Penney might be returning downtown and hope it's true.

"I think it would be a great location for JC Penney," said Tyler Myers, who opened an IGA supermarket in the basement of the Kress building three years ago.

He said he has a long-term lease — "30-plus years" — and plans to remain there for the duration.

"I, for one, am very much in favor of more retail," he added.

Seattle Times researcher David Turim contributed to this story.

Amy Martinez: 206-464-2923 or amartinez@seattletimes.com

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