Escondido is on track to bring its first Costco store to the city as an option for local shoppers, at the site of the former Sears store at the Westfield North County mall.
At a special meeting Monday, the City Council voted 5-0 to authorize a lease with Costco for the city-owned parcel where Sears operated, which could run for up to 55 years with a series of lease extensions contained in the agreement.
Deputy City Manager Chris McKinney stressed that Costco must still go through the land-use approval process including environmental analysis before construction can start.
But Monday’s vote does clear the way for Costco to submit its development application to the city, McKinney said.
“This was a very, very important first step,” McKinney said after the meeting.
And the City Council seemed in an upbeat mood as it voted to approve the lease agreement.
Councilmember Joe Garcia said social media and in-person comments have been favorable. “Everyone is for the most part very excited about Costco coming to Escondido, particularly at that site,” Garcia said.
“It’s great to have it in our city,” said Councilmember Consuelo Martinez. “I think Costco will bring more people and more businesses to the mall.”
Along with bringing new life to an unused parcel at the mall, a new Costco store is expected to generate $1.5 million annually in sales tax and more than 300 jobs, according to a city staff report.
Councilmember Tina Inscoe said she’s glad Costco is interested in locating a new store in Escondido. “The additional tax revenue is much-needed by the city,” she said.
The lease agreement authorized by the council’s vote calls for a 20-year original lease, with seven five-year options for extensions. The council also voted to extend the city’s lease with Westfield, the mall operator, by 24 years if the company chooses to extend its current lease beyond 2053. Both the Westfield and Costco leases would then potentially run through 2077.
If Westfield opts to extend its lease, under the agreement, the company would be required to invest at least $64 million in upgrades to the property. And Costco is expected to invest $35 million in the Escondido property if its development plans are approved by the city.
The agreement calls for Costco to pay $100,000 in rent annually for the former Sears site, but the rent won’t come due for up to 36 months to allow for development and construction at the site, said the staff report. In addition, Costco will be responsible for any needed environmental cleanup of the site of a proposed gas station on the property, if the use changes or the lease ends.
Two members of the public emailed comments on the proposal at Monday’s meeting. One, Susan Luka, said, “Having a strong anchor like Costco will be great for the mall and a real asset for the community.” Currently, she said, a number of empty storefronts in the mall is discouraging to visitors.
Bonnie Marblestone, however, wrote that two nearby Costco locations — in San Marcos and Carmel Mountain Ranch — already serve Escondido. A new Costco at the mall would increase traffic, potentially lower property values for nearby homes and compete with an existing Target store in the mall.
The Westfield North County mall occupies 83 acres at the south end of Escondido and was originally developed in the mid-1980s. The city owns about 74 acres of the mall property. The mall includes 1.2 million square feet of retail space and at the time it was built it was touted as the largest enclosed mall in the San Diego region, said the staff report.
Originally the mall had six independent anchor store tenants, said the report, but due to consolidation in the industry there are currently two department store ownerships, J.C. Penney and Macy’s. Rents were set low to attract anchor tenants, with most of the department stores paying $98,000 per year. J.C. Penney pays only $10 per year, said the report.
Since 2016, the rent paid to the city has averaged $1,382,000 annually, said the report.
With the Costco lease in hand, the only vacant “big box” store remaining in the mall is the former Nordstrom’s site, McKinney said.
In 2012, Westfield completed a $56 million renovation of the property that included a new three-story Target store, renovated food court, upgraded common areas and entrances, and a resurfaced parking area.