Sell for More Trivia is a weekly blog series that playfully presents a trivia question about commercial real estate.
More stores will close…but the worst is behind us.
U.S. landlords are working hard to hang on to tenants but they’re gearing up for another challenging year as more store closures are anticipated in 2019.
Research firm Reis Inc. reported that the overall U.S. retail vacancy rate in the fourth quarter of 2018 remained flat at 10.2%. Given the many store closures across the U.S., the minimal change in vacancy rate shows how the retail sector has withstood the structural changes in the industry. Many feared that vacancy rates would soar and rents would plummet. This didn’t happen and the doomsday prognostications proved to be overblown.
However, Reis warns that more stores are expected to close in the coming months, and the industry continues to face a number of headwinds, including growth in online shopping.
After a record 7,000 U.S. store closings in 2017, closings fell to 5,524 in 2018. Year-to-date in 2019, U.S. retailers have announced 1,674 store closures and 1,380 store openings. So who’s closing?
- Roughly 21 bankruptcies of major retailers were filed in 2017, including Toys ‘R’ Us, followed by about 16 in 2018, including Sears and Bon-Ton Stores. So far in 2019, ShopKo and children’s apparel retailer Gymboree have filed for Chapter 11. Shopko announced that it will close 38 additional stores as part of its reorganization, while Gymboree plans to close 800 stores.
- Apparel retailer Chico’s will close at least 250 stores, including White House Black Market, over a three-year period.
- J.C. Penney’s announced it will close three stores in 2019 and more will likely follow.
- Destination Maternity plans to close up to 280 stores by 2022.
- Gap is looking to close hundreds of stores.
- Starbucks is closing 150 locations.
- Christopher & Banks will shutter 30 to 40 stores.
- Mattress Firm filed for bankruptcy and is closing hundreds of stores.
- Lowe’s announced it will shut down 20 underperforming U. S stores by Feb. 1.
- Ratings firm Moody’s recently released a list of 34 distressed retailers, which includes J.C. Penney, PetCo, Rite-Aid, Hudson’s Bay Co., Lands’ End, Pier One Imports, Neiman Marcus, and J.Crew.
Retail is evolving quickly and it will be survival of the fittest. Some weak retailers out there aren’t going to make it. To stay competitive, retailers have to invest in their stores, invest in their online capabilities and pay their debts. If they’re in a state of distress, they can’t do all three.
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About Beau Beach, CCIM
Beau is a tenacious Commercial Real Estate Broker, author and adoring father of four. His clients appreciate his no-nonsense demeanor and his legendary work ethic.
Beau leads Prowess IRES which is a commercial real estate broker for sellers in the Nashville, Milwaukee, South Florida and Chicago markets.
He’s the author of the books The 3 Reasons: Why Most Commercial Properties Don’t Sell and True Wealth: What Every Seller Should Know About 1031 Exchanges.
Beau can be reached at 414.324.4938, 615.603.9770, click to schedule a call or Beau@ProwessIRES.com