It’s hard to miss the massive storm cloud hanging over the retail sector these days. Retailers took some hard knocks during the recession, and just when they thought they saw a light at the end of the tunnel, it turned out to be Amazon – in a very big truck.
E-commerce and changing consumer behavior is shifting the retail landscape and it is leaving numerous casualties in its wake. Retailers ranging from Sears and Kmart to Sports Authority and Office Depot are shuttering stores. After topping 5,800 in 2015, store closings slowed in 2016 to a modest 3,435. However, that pace is ramping up again with an estimated 6,410 store closings for 2017 that were announced as of second quarter, according to the International Council of Shopping Centers (ICSC).
Clearly, there is more shake-out ahead. Toys R Us is among the latest retailers reportedly eying bankruptcy protection, while others such as Macy’s, JCPenney and Gap are continuing to shrink their brick-and-mortar store portfolios as they expand digital platforms.
The challenges facing retailers and shopping center owners is magnified by a simple fact that the U.S. is “over-stored” with too much space in many metros. That surplus is creating a bigger gap in the market with top “A” shopping malls that have the best locations and tenants are outperforming, while lower quality “B” and “C” malls struggle to hold tenants and attract shoppers. Some real estate analysts are forecasting that hundreds more shopping centers will close or become obsolete over the next decade.
Yet it is important to point out that it is not all doom and gloom for retail. Brick-and-mortar retail is not dead. In fact, there is still a healthy pace of new store openings with 3,158 stores that opened last year and another 3,197 openings that have been announced for 2017 as of second quarter, according to the ICSC.
Those empty big box stores and failing malls have created new real estate opportunities for retailers who are still hungry for expansion. For example, Applebee’s recently announced that it would close 135 locations around the country. The ability to grab a highly visible location that already has much of the necessary kitchen and plumbing infrastructure in place can be a big value add for other restaurant chains and independent operators.
Business owners and brokers can leverage Reonomy’s property search tools to quickly access key property details such as size, zoning and ownership. For example, Applebee’s closed a location at 401 Market Street in Chattanooga in early September. In addition to providing the names of the property’s owners, Reonomy’s data points offer a detailed property description that can help to quickly qualify or disqualify a property for a new user or investor. For example, data shows that this Downtown Chattanooga building was constructed in 2010, spans 2,198 square feet and sits on 0.28 acres.
Vacant big box stores and struggling shopping centers also have become ripe for opportunistic redevelopment. Big box retail stores, for example, are being converted to gyms, trampoline parks and self-storage facilities. Reonomy allows a user to search for a specific property by address or conduct a broader search based on size and type of property in a particular market, such as grocers and supermarkets that are sized between 50,000 and 75,000 square feet in San Diego.
Commercial real estate developers and investors are looking for creative ways to repurpose those empty spaces to add value and generate alpha returns. The key is to leverage tools that can efficiently drill down and identify opportunities with detailed ownership information that helps to identify viable acquisitions.
Reonomy offers real-time access to detailed property data that business owners, investors and commercial real estate professionals need in today’s competitive marketplace. Try Reonomy National for free today.