On the east side of Petaluma, at North McDowell Boulevard and East Washington Street, the former Kmart building has three new tenants. Raley's, a short walk away, will close on Jan. 26, 2027. Most shoppers think of this as one center. It is actually two sister centers that share a parking field, and this winter their fortunes run in opposite directions.
The corner's grocery shopping is moving across a property line, from the Raley's supermarket in Plaza South to a discount Grocery Outlet in Plaza North, and that means a different kind of store.
One Parking Lot, Two Shopping Centers
Local news stories have called the Raley's site part of Plaza North. Gallelli Real Estate owns and leases the property, and it lists Raley's as an anchor of the next-door Plaza South. Plaza North covers about 191,256 square feet at the northwest corner of North McDowell and East Washington, right off Highway 101.
Here's how the owner lists the anchor stores for each center:
| Plaza North | Plaza South | |
|---|---|---|
| Anchors listed by the owner | Hobby Lobby, Boot Barn, Grocery Outlet, CVS Pharmacy | Raley's, Trader Joe's, Petco, Big 5 Sporting Goods |
| What changed in 2026 | Former Kmart space reopened as three stores | Raley's set to close Jan. 26, 2027 |
| Other names the owner highlights | Starbucks, El Pollo Loco, Lola's Market, Massage Envy, Club Pilates |
The owner names those last five businesses as other draws across the property without placing them in one center or the other. In the closing story, The Press Democrat described Raley's as sitting next door to Trader Joe's and near Lola's Market, a grocery that specializes in Mexican food.
Seen as one shopping trip, the change is easy to follow. The north side got its anchors back this summer, and the south side loses its biggest one in January.
The Kmart Building Took Six Years and Three Tenants to Fill
Most of the shift comes from how long the north side sat empty. The timeline:
- 1980. The 90,000-square-foot Kmart opened across McDowell from Lucchesi Park. It had a dine-in restaurant and an outdoor furniture and garden department, and for four decades it anchored Plaza North.
- Early 2020. Kmart closed all of its California stores. Apart from occasional seasonal leases to Spirit Halloween, the building stayed empty.
- Early 2025. The City of Petaluma reviewed a plan for 261 N. McDowell to split the big-box building into three suites.
- March 2025. The Argus-Courier reported that permits were under review for Boot Barn, Hobby Lobby and Grocery Outlet.
- Early July 2026. Boot Barn opened. Hobby Lobby officially opened that same month, after a year-long renovation that divided the building into three units.
- Thursday, Aug. 27, 2026. Grocery Outlet opened between the other two, and Mayor Kevin McDonald led the ribbon-cutting.
- Jan. 26, 2027. The Raley's at 157 N. McDowell Blvd. is scheduled to close.
The Argus-Courier's July story put the vacancy at more than six years. The grocery piece of the refill came six days after Raley's set its closing date. Raley's announced on Aug. 21, and Grocery Outlet opened on Aug. 27.
Why the Raley's Closing Lands Differently Now
If Raley's had announced this closing in 2023, east Petaluma would have had a dark Kmart and a dark grocery store side by side. Instead, the new Grocery Outlet is "within a few minutes' walk of the soon-to-be closed grocery store," as the Argus-Courier put it in September.
The replacement is a different kind of store, though. In the same story, the company described itself as an "extreme value retailer" that uses "an opportunistic buying model." It promises 30% to 60% savings and carries fresh produce and meat alongside what it calls "unexpected and rare finds." Each location runs under an independent operator. Victor Soares runs the new east-side store, and Michael Billeci runs the original Petaluma Grocery Outlet at the River Plaza Shopping Center on Washington Street. That west-side store plans to stay open, so Petaluma now has two.
Raley's is a full-line supermarket, and its official store page lists an in-store pharmacy. The store page lists pharmacy hours of 10 a.m. to 6:30 p.m. on weekdays and 9 a.m. to 5:30 p.m. on Saturdays, closed Sundays. It does not post a closing notice. If you fill prescriptions there, the pharmacy counter is the place to ask what happens to them after January. On the north side, the owner lists CVS Pharmacy as one of Plaza North's anchors.
Petaluma isn't the only store Raley's is closing. The Press Democrat reported that the West Sacramento-based company plans to close at least six stores in California and Nevada by June 2027. Locations in Antioch and Mountain View have already closed, and stores in Brentwood, Roseville and Elko, Nevada, are on the list. The company cited "local market conditions and the long-term financial sustainability of these locations." The Petaluma store employs 48 people, and Raley's said it will offer as many of them as possible transfers to other stores.
Onita Pellegrini, CEO of the Petaluma Area Chamber of Commerce, told The Press Democrat:
"We hope that the location will ultimately bring another strong business or community-serving use to Petaluma."
Where the Weekly Shop Can Go After January 26
Trader Joe's at 169 N. McDowell Blvd. is the grocery store right next door to Raley's in Plaza South. The Press Democrat counted Petaluma's other grocery options as two Safeway stores, two Lucky stores, Trader Joe's, Sprouts Farmers Market and Grocery Outlet, plus the locally owned Petaluma Market. Their addresses, from each store's own site:
- Safeway, South McDowell: 389 S. McDowell Blvd., a straight run down the same boulevard
- Safeway, Sonoma Mountain Parkway: 701 Sonoma Mountain Pkwy.
- Lucky, Lakeville Highway: 939 Lakeville Highway
- Lucky, Petaluma Boulevard North: 1000 Petaluma Blvd. N.
- Sprouts Farmers Market: 401 Kenilworth Dr., Suite 1040
- Petaluma Market: 210 Western Ave. downtown
- Grocery Outlet: the new Plaza North store between Boot Barn and Hobby Lobby, and the original at River Plaza on Washington Street
For shoppers near Lucchesi Park, Trader Joe's, the new Grocery Outlet and Lola's Market already share the corner with Raley's. Raley's in-store pharmacy is the service on that corner with no announced replacement.
The Space That Comes Next
The Press Democrat's closing story didn't name a replacement tenant for the Raley's building. The Chamber's comment was a hope for "another strong business or community-serving use." The north side shows how long a grocery-sized space can take to fill. The Kmart sat empty for more than six years, and once tenants were lined up, the permits and the year-long renovation took about a year and a half.
The smaller spaces at Plaza North are also changing hands. The owner's leasing page lists a dozen suites available, ranging from 575 to 3,037 square feet. One of them, Suite 277, is marked as opening up on Dec. 1, 2026. Expect a few more changes along the storefronts between Starbucks and Club Pilates over the winter, in addition to the big Raley's space.
For now, the Raley's on North McDowell is open until Jan. 26, 2027. Trader Joe's, Petco and Big 5 share Plaza South with it, and the former Kmart has three tenants for the first time.
If you own near the McDowell and East Washington corner and want to know how changes like this show up when nearby homes sell, Pat Kelly Real Estate is glad to talk it through. Request a free home valuation or market consultation, and I'll share what I'm seeing in east Petaluma.
