Retail store closures surpass openings, marking a significant transition towards service-oriented occupants.
A New Wave of Store Closures
Here's the skinny on what's going down in the retail world in 2024: store closures are breaking records, with more stores shutting their doors than opening ones. According to JLL's Q4 real estate report, over 9,900 store closures were announced from 2024 through mid-February, while only 7,700 stores were opened.
The hardest-hit sectors are discount, dollar, drug stores, and apparel. In fact, industry titans like Party City and Joann have announced closing over 1,200 stores combined, and mall space demand has softened thanks to rising vacancies and falling move-ins. Malls currently have an 8.7% vacancy rate, the highest among all retail property types.
So why is this happening? Simple. The Retail apocalypse, as some folks like to call it, is the result of a number of factors: industry churn, market shifts, and strategic decisions. Retailers are constantly looking for ways to improve their bottom lines, and some physical stores just aren't cutting it anymore.
E-commerce and omnichannel retailing are not helping, with many brands focusing on digital platforms instead. Yet, physical stores still play a crucial role in a successful omnichannel strategy. Economic pressures, like high interest rates and increasing construction costs, have also limited new retail development.
But with challenge comes opportunity. The massive store closures have left nearly 140 million square feet of retail space up for grabs, making it seem like finding a desirable location would be a piece of cake. However, with space availability standing at 4.7%, it's more like finding that hidden gold nugget in a pile of rocks. Over 30% of available space is situated in Class C retail properties, and less than a quarter were built this century.
Macy's plans to close 66 of its stores this year, which translates to 12 million square feet of anchor space becoming available in malls. Mall owners now face a dilemma: should they redevelop the space and possibly add a mixed-use component, or backfill the anchor with one or more retailers? The good news is that entertainment businesses, fitness centers, grocery stores, home improvement, furniture, and other department store chains are eager to jump on this space.
But hey, don't forget: although store closures are on the rise, retail isn't going anywhere. In fact, some retail sectors, like grocery, discount, and dollar stores, are actually seeing positive opening trends. It seems the retail industry is just going through some major growing pains. As always, those who adapt and evolve will thrive!
- Artificial intelligence (AI) could play a significant role in the absorption of the abandoned retail space, potentially identifying optimal locations for new businesses.
- The financial sector is closely monitoring the retail marketclosures and bankruptcy filings, as the high number of store closures is expected to lead to massive wealth transfers from retailers to creditors and landlords.
- In the midst of the store closure trend, some retailers are thriving, with the health and wellness sector showing strong growth because of increasingly health-conscious consumers.
- The space vacated by Macy's store closures will likely be snapped up quickly by forward-thinking retailers who understand the value of adapting and evolving in the changing retail landscape.
- With the increased focus on e-commerce and the shuttering of physical stores, researchers are studying the impact of these store closures on local businesses and urban economies.
- In the entertainment industry, producers are exploring potential partnerships with retail spaces that have undergone closure to create unique, immersive experiences for audiences.
- The business world is bracing for further disruptions in the retail sector, as analysts predict that over 10,000 additional store closures could be announced by the end of the year, along with an increase in bankruptcy filings for retailers among the 'Big Box' and 'Mall' categories.
