Bed Bath & Beyond in San Francisco, California (USA), on April 24, 2023.
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Bed Bath & Beyond has "Closing Soon Soon" signs in strip malls all over the country.
For other retailers, these signs could just as easily be "For Rent".
The bankruptcy of the home goods retailer on Sunday will not only give competitors a chance to increase their market share and gain new customers. The closing of its stores will lead to a rush for space by retailers.
Bed Bath is joining a long list of bankrupt companies such as Kmart, Sears and others that have vacated their spaces to make way for new stores. Bed Bath could rent out nearly 500 spaces between its 360 Buy Buy Baby stores and its 360 name-brand stores. Bed Bath had already closed many locations, including 150 of its underperforming name-brand stores and all 49 Harmon FaceValue beauty chain locations.
Stores and website are still open. This week, liquidation sales started.
Bed Bath's upcoming closures come at the right time, say real estate companies and retail industry observers. The retailer is located in suburban areas with high traffic. According to analysts, its stores are easy to adapt due their size - typically around 30,000 sq. ft. The vacancy rate of off-mall shopping centres is low, and the demand for them is high. This is especially true as discounters expand and malls experiment with new concepts.
Deborah Weinswig is the CEO of Coresight Research. A retail advisory firm. Former Bed Bath and Beyond stores could be transformed into other retail spaces. She said they could be converted into doctor's offices by CVS and Walgreens as these drugstore chains move into primary care or into grocery stores for fast-growing chains like Aldi or Lidl.
Some can be divided into multiple locations. Some may be backfilled with a single tenant.
Bed Bath's stores are better prepared to move in than Kmart or Sears because they have been better maintained. The better performing stores "only need a light dusting," said the spokesperson.
Weinswig stated that he was not concerned about the situation. "I am not concerned at this time because you have had such a huge change in the demand for physical space."
Bed Bath & Beyond stores are going on sale as off-mall spaces are hot and customers are returning to stores.
James Bohnaker is a senior economist at Cushman & Wakefield. He said that weaker retailers' locations were consolidated during the Great Recession, and then again during the Covid epidemic. A mix of strong retailers is now vying for the same strip centers. This includes dollar stores, discount retailers, direct-to consumer players like Warby Parker, Casper, as well as traditional mall retailers such Macy's.
Shopping centers' vacancy rates fell to just 5.6% during the first quarter of the year. This is the lowest rate since Cushman & Wakefield, a commercial real estate company, began keeping track in 2007. These locations, which include major grocery stores and businesses such as gyms and restaurants have become popular because they are convenient and close to new subdivisions, growing communities and wealthy shoppers.
Coresight Research says that retail real estate in the U.S. had a great year in 2022, with store openings exceeding closures for the very first time since 2016.
The firm estimated that major retailers will open roughly 2,500 new net stores in the U.S. by 2022.
Announcements of store openings in the United States for 2023.
Discounters have opened the most stores in the U.S. this year as of April.
Dollar General: 1,065 stores
Family Dollar (owned Dollar Tree) has 328 stores
Dollar Tree: 308 stores
Five Below: 199 stores
JD Sports: 134 stores
TJX Companies: 102 stores (including T.J. Maxx HomeGoods Marshalls).
Wawa: 100 stores
Burlington Stores: 96 stores
Ross Stores: 92 stores
Bath & Body Works: 92 stores
Tractor Supply: 70 stores
Source: Coresight Research data
Retailers are expected to grow at the same pace as last year, despite rising interest rates and a choppy economy.
According to Coresight's Weinswig, there are multiple factors that drive the demand for retail spaces: Retailers now have more money following shoppers' pandemic spending spree. Brick-and-mortar shops are seen by companies as both billboards to promote their brands and fulfillment centres for their ecommerce orders. Retailers are also adding technology to understand their customers' behavior as Google and Apple privacy changes make tracking them online more difficult. Hybrid work schedules encourage shoppers to visit shops throughout the day.
Coresight reports that discounters and players with low prices, like Dollar General, Dollar Tree, and TJX Companies, are the ones who have big expansion plans. They could be potential tenants depending on the way former Bed Bath spaces have been sliced.
Matthew Harding is the CEO of Levin Management. He said that Bed Bath's empty boxes would be perfect for gym chains like LA Fitness, Crunch and Planet Fitness as well as discount banners such as TJX owned HomeGoods and Marshalls. The New Jersey firm, which is a landlord with over 100 properties across five states, including Washington, D.C., also manages some of the current and former Bed Bath stores.
Even mall players might take a peek. Coresight estimates that Foot Locker will close 187 stores across the U.S. by 2022. This is more than any other retailer. Mary Dillon has said that the company plans to open more stores in strip malls. Macy's also has opened stores outside of malls.
Consider it the retail cycle of life.
Kimco Realty is a real estate trust that has 27 Bed Bath Stores in its portfolio. It said they already have single tenants lined up for most of these locations. The company, through a spokesperson, said that it cannot yet reveal names but the mix includes off-price and full-price stores, as well as grocery, entertainment, furniture, automotive, or appliance stores.
In a strip-mall in Phoenix, a former Bed Bath & Beyond store of Kimco reopened recently as a Burlington shop.
Levin Management reports that a HomeGoods, owned by T.J. Maxx, owner of TJX Companies, is moving into a former Bed Bath & Beyond in a shopping center located in Edgewater, New Jersey.
According to Rick Latella of Cushman & Wakefield's retail valuation practice, negotiations are currently underway in Bergen County, New Jersey, about converting a two-story Bed Bath & Beyond store into multiple properties.
He stated that the owner was close to signing a lease with Ross Stores for an entire floor. On the second floor, REI, Petco, and Barnes & Noble are all possible tenants.