The Old Kmart Corner Filled In Just as Raley's Gets Ready to Leave

On Aug. 21, Raley's announced that its east Petaluma supermarket would close in January. Six days later and a few minutes' walk away, Mayor Kevin McDonald cut the ribbon at Petaluma's second Grocery Outlet, which opened in what used to be the Kmart.

So in the same week, the corner of North McDowell that had been empty the longest got busy again, and the grocery store that seemed most permanent set its closing date. Both changes point the same way. The old Kmart building came back as three stores of moderate size, and once Raley's closes on Jan. 26, 2027, that divided building will sit at the center of east-side grocery shopping.

Why the Kmart building came back in thirds

Kmart opened in 1980 as Plaza North's anchor, across McDowell from Lucchesi Park. The Argus-Courier remembered it as a 90,000-square-foot store with a dine-in restaurant and an outdoor furniture and garden department. The store closed in early 2020, when Kmart shut all of its California locations. For the next six-plus years, the building sat empty except for seasonal stretches when Spirit Halloween rented part of it.

For a while it looked like one big store would replace one big store. In April 2021, city staff told the Argus-Courier that Home Depot had asked about the property, though nothing had been filed. In January 2022, plans were filed for a Home Depot of 107,891 square feet plus a 28,216-square-foot garden center and more than 450 parking spaces, all replacing the old building. On July 18, 2022, the City Council changed its zoning so that larger stores needed a conditional use permit and a full environmental review, and Home Depot withdrew its application.

The plan that finally worked reused the building instead of replacing it. The city's project page lists the existing structure at 92,643 square feet and describes the work as interior partitions creating three commercial suites, along with facade and site upgrades. In March 2025, the Argus-Courier reported that three stores were slated for the space. A renovation of about a year followed.

As a result, the building now holds three separate stores with three separate reasons to visit, where it once held a single anchor that had to do everything.

What the divided building holds now

All three stores opened within about eight weeks of each other this summer.

The grocery store in the middle is the one that will matter most after January. Grocery Outlet's stores are run by independent operators, a model the company adopted in 1973. Michael Billeci runs the west-side store at River Plaza on Washington Street, which is staying open. The new east-side store is run by Victor Soares, who has worked in grocery stores since he was 13 and learned the business in every department of a supermarket, according to the Argus-Courier.

The company says it saves shoppers 30% to 60% through what it calls "an opportunistic buying model," which offers "unexpected and rare finds" alongside fresh produce and meat.

The January gap

Raley's set the Petaluma closing for Jan. 26, 2027. In the Press Democrat's report, the company said the store employs 48 people and that it would offer transfers to "as many affected employees as possible" before closing.

The closure is part of a wider downsizing, not a judgment on McDowell alone. According to the same report, Raley's will close at least six stores in California and Nevada by June 2027. Antioch closed in April and Mountain View's Nob Hill Foods in May, with Brentwood, Roseville and Elko, Nevada, still to come. Chief Marketing Officer Carol Barsotti pointed to "local market conditions and the long-term financial sustainability of these locations."

No replacement tenant has been announced. In the same Press Democrat story, Onita Pellegrini, CEO of the Petaluma Area Chamber of Commerce, said, "We hope that the location will ultimately bring another strong business or community-serving use to Petaluma."

The Kmart building's history explains why that hope comes without a date. The last large vacancy on this corner lasted more than six years, and a plan to fill it with one big store fell apart along the way. On North McDowell, an empty anchor store has not come with a set timeline for filling up.

The east-side grocery run after Jan. 26

Starting next Thursday, there are about three months left of the current setup. After that, the stores closest to the old Raley's door will be the ones that stay:

• Trader Joe's, right next door to the Raley's space.
• Lola's Market, nearby, a grocery that specializes in Mexican food.
• Grocery Outlet in the old Kmart, a few minutes' walk from the Raley's door.

Across town, the citywide list the Press Democrat compiled includes Safeway and Lucky stores, Sprouts Farmers Market, the original Grocery Outlet at River Plaza on Washington Street, and the locally owned Petaluma Market on Western Avenue.

Plaza North also has smaller neighbors. In its March 2025 report on the Kmart plan, the Argus-Courier named Soban Korean Cuisine, iWashToo and Fruta All-Natural Ice Cream as businesses that share the center. Together with Trader Joe's and Lola's, they were already in place before the new stores arrived. They share the center with the divided building that now stands where Kmart once did, across from Lucchesi Park.

A Saturday stop that used to start in the Raley's lot will start a few doors down, at the building that sat empty from 2020 until this summer.

If you own a home on Petaluma's east side and want to talk through how the changes along North McDowell fit your plans for the coming year, Rob Sullivan is happy to sit down over coffee and talk it through. Let's Connect.