Retailers went through another tough year in 2017, during which store closings included 1,430 Radio Shacks, 808 Payless ShoeSource outlets, 667 Ascentas (which sell nutritional supplements), and 600 Walgreens.
That brick-and-mortar attrition continued in the first month of 2018, when Sears announced it would close another 103 Sears and Kmart outlets, and Toys ‘R’ Us—whose debt now totals about $5 billion—said it would close up to 182 units, reducing its total in the U.S. by one fifth. The carnage this year will also eliminate 379 Teavanas (Starbucks’ struggling tea retail outlets), 200 Gaps and Banana Republics, 63 Sam’s Clubs, 11 Macy’s, 40 Bon-Tons, 50 J. Crews, and between 100 and 150 Michael Kors boutiques.
Physical stores continue to get hammered by online shopping that accounted for more than 9% of total U.S. retail sales last year. However, not every physical vestige of retailing is collapsing under the pressure from eCommerce. 7-Eleven this month made the biggest acquisition in its history when it paid $3.2 billion to buy 1,030 convenience stores in 17 states owned by Sunoco LP, raising its total store count in North America to close to 9,700.
Earlier this month, the New York Post ran an article under the headline “There’s never been a better time to open retail stores in NYC.” The story pointed out how retailers from several countries are scouring New York for real estate. Levi’s will soon relocate its flagship store into a larger, 17,250-sf space in Vornado Realty Trust’s 1535 Broadway. Other retail chains looking for more space in the Big Apple include Target and Lord & Taylor.
That retailers come and go is hardly news to anyone who follows this sector or, for that matter, shops. But the constant drumbeat about a “retail apocalypse” is still premature, according to a report released this month by the research and consulting firm Fung Global Retailing & Technology (FGRT).
Despite weaker foot traffic, there was only a slight net decline in total U.S. retail stores last year, the first dropoff since 2009.
The report acknowledges that shopper traffic dropped off by 7.9% last year. And 6,995 stores closed in the U.S. in 2017 representing a net decline of 0.1%, according to Euromonitor International, which also estimated a 0.6% decrease in total retail selling space to 8.52 billion sf.
But the store-count reduction was the first since 2009, and it seemed to hit the apparel, mass merchant, and electronics and appliance sectors the hardest.
The grocery and dollar-store sectors, on the other hand, expanded “significantly” last year, with major dealers in those sectors opening a net 1,785 outlets. Other retailers, like the supermarket chain Aldi and the department store T. J. Maxx, are actively opening stores in off-mall and strip-mall locations.
Indeed, selling space for variety stores rose by 4.4% last year, by 1.3% for grocery stores, and by 1% for warehouse clubs.
FGRT points out that while brick-and-mortar retailers are getting more business from online sales, their in-store business continued to expand last year. Nearly 88% of all U.S. retail sales were transacted in physical stores in 2017, according the Census Bureau data. Offline retail sales grew by about 2.5%, and contributed to total U.S. retail sales increasing by 4%.
The study also notes that if online sales were taken out of the equation, the average sales per retail store rose 2.4% to $3.13 million, and average sales per square foot increased by 2.6% to $353.
It’s been conventional wisdom for a while that regional malls have been fast approaching their expiration dates. But FGRT states that superregional malls—defined by having at least 800,000 sf of selling space—were the only major shopping-center segment to grow its occupancy rates last year. FGRT also notes that open-air centers have proven to be a resilient real-estate segment, primarily because they typically have few apparel tenants and often include a strong grocery component.
Mall owners in general are diversifying their mix to incorporate more centers with premium tenants like Apple and even Tesla (which currently operates 109 retail showrooms nationwide). David Simon, CEO and Chairman of Simon Property Group, the country’s largest retail developer, says his company sees “significant opportunity” in densification of its shopping centers with the addition of mixed-use elements such as hotels, multifamily, and offices.
Another developer, Kimco, which was negatively affected by Sports Authority’s liquidation, sees future tenant mixes including more nascent retail chains such as Lidl and HomeSense from TJX. “Kimco is adapting to [the] evolving landscape by working hard to deliver both the product and an experience to tenants and shoppers commensurate with this new world order,” says CEO Conor Flynn. “That is why at many of [our] sites, you’ll see more health and wellness, more service providers, more food and restaurants, more entertainment and more experiential retailing.”
Related Stories
Giants 400 | Jan 31, 2023
2022 Retail Giants: Top architecture, engineering, and construction firms in the U.S. retail building sector
Gensler, CallisonRTKL, Kimley-Horn, Henderson Engineers, Whiting-Turner Contracting, and Turner Construction top BD+C's rankings of the nation's largest retail sector architecture, engineering, and construction firms, as reported in the 2022 Giants 400 Report.
High-rise Construction | Dec 7, 2022
SOM reveals its design for Singapore’s tallest skyscraper
Skidmore, Owings & Merrill (SOM) has revealed its design for 8 Shenton Way—a mixed-use tower that will stand 63 stories and 305 meters (1,000 feet) high, becoming Singapore’s tallest skyscraper. The design team also plans to make the building one of Asia’s most sustainable skyscrapers. The tower incorporates post-pandemic design features.
Mixed-Use | Dec 6, 2022
Houston developer plans to convert Kevin Roche-designed ConocoPhillips HQ to mixed-use destination
Houston-based Midway, a real estate investment, development, and management firm, plans to redevelop the former ConocoPhillips corporate headquarters site into a mixed-use destination called Watermark District at Woodcreek.
Retail Centers | Nov 29, 2022
'Social' tenants play a vital role in the health of the retail center market
After a long Covid-induced period when the public avoided large gatherings, owners of malls and retail lifestyle centers are increasingly focused on attracting tenants that provide opportunities for socialization. Pent-up demand for experiences involving gatherings of people is fueling renovations and redesigns of large retail developments.
Retail Centers | Nov 17, 2022
Streetwear brand Culture Kings plants its flag in Las Vegas
The immersive retail concept gives customers more reasons to stay in the store longer.
BAS and Security | Oct 19, 2022
The biggest cybersecurity threats in commercial real estate, and how to mitigate them
Coleman Wolf, Senior Security Systems Consultant with global engineering firm ESD, outlines the top-three cybersecurity threats to commercial and institutional building owners and property managers, and offers advice on how to deter and defend against hackers.
Giants 400 | Aug 22, 2022
Top 90 Construction Management Firms for 2022
CBRE, Alfa Tech, Jacobs, and Hill International head the rankings of the nation's largest construction management (as agent) and program/project management firms for nonresidential and multifamily buildings work, as reported in Building Design+Construction's 2022 Giants 400 Report.
Giants 400 | Aug 22, 2022
Top 200 Contractors for 2022
Turner Construction, STO Building Group, Whiting-Turner, and DPR Construction top the ranking of the nation's largest general contractors, CM at risk firms, and design-builders for nonresidential buildings and multifamily buildings work, as reported in Building Design+Construction's 2022 Giants 400 Report.
Giants 400 | Aug 22, 2022
Top 45 Engineering Architecture Firms for 2022
Jacobs, AECOM, WSP, and Burns & McDonnell top the rankings of the nation's largest engineering architecture (EA) firms for nonresidential buildings and multifamily buildings work, as reported in Building Design+Construction's 2022 Giants 400 Report.
Giants 400 | Aug 21, 2022
Top 110 Architecture/Engineering Firms for 2022
Stantec, HDR, HOK, and Skidmore, Owings & Merrill top the rankings of the nation's largest architecture engineering (AE) firms for nonresidential and multifamily buildings work, as reported in Building Design+Construction's 2022 Giants 400 Report.