The Bed Bath & Beyond store in San Francisco, CA, USA is closed on Monday, April 24, 2023.
David Paul Morris | Bloomberg | Getty Images
In shopping malls across the country, Bed bath and others The store has a “Closing Soon” sign.
For other retailers, these may also be “For Rent” signs.
The home furnishings retailer, which filed for bankruptcy on Sunday, will not only create opportunities for competitors to gain new customers and market share. The stores it closes will start vying for land from retailers hungry for extra space.
Bed Bath will be added to the list Other bankrupt companies, like Kmart and Sears, made room and made way for stores. Bed Bath has nearly 500 open locations — between its 360 namesake stores and 120 Buy Buy Baby locations — for lease by other companies. It has shuttered a number of locations, as it shuttered 150 underperforming namesake stores and shuttered all 49 of its Harmon FaceValue beauty chain.
The company’s stores remain open and its website is up and running. Clearance sales start this week.
According to real estate firms and retail watchers, however, the timing of Bed Bath’s imminent closure is opportune. The retailer has stores in high-traffic suburbs. Its stores are easily amenable to their size — typically around 30,000 square feet, according to industry analysts. Off-market malls have low vacancy rates and high demand, especially as discounters grow and traditional mall players experiment with new concepts.
Former Bed Bath stores could become a variety of other retail spaces, said Deborah Weinswig, chief executive of retail consultancy group Coresight Research.they can be a doctor’s office CV or walgreensas pharmacy chains move into primary care, or transform into grocery stores for growth chains like Aldi or Lidl, she said.
Some may be split into multiple company locations. Others may be backfilled by a single tenant.
Bed Bath spaces are easier to move into than Kmart and Sears locations because they’re generally better maintained, while better-performing stores just need “a little cleaning,” she said.
“In the past, if we were going through something like this, I might have worried more, but I wouldn’t,” Weinswig said. “I’m not concerned at this point because your physical space needs have changed dramatically.”
Appetite for full mall space
Bed Bath & Beyond stores will hit the market as shoppers flock to the hot space outside the mall.
James Bohnaker, senior economist at Cushman & Wakefield, said weaker retailers were thinned out during the fallout of the Great Recession and during the Covid pandemic.Now, some stronger retailers are vying for space in similar strip centers, including dollar stores, discount retailers, direct-to-consumer players such as warby parker and Casper, as well as traditional mall retailers such as Macy’s.
The mall’s vacancy rate fell to 5.6% in the first quarter, the lowest level since commercial real estate firm Cushman & Wakefield began tracking it in 2007. These locations, which typically include a large grocery store as well as businesses such as gyms and restaurants, are popular for their convenience and proximity to growing neighborhoods, new neighborhoods and wealthier shoppers.
2022 is a banner year for retail real estate in the U.S., as store openings outpace closings for the first time since 2016, according to Coresight Research.
The firm found that major retailers will open about 2,500 net new stores in the U.S. through 2022.
Year-to-Date 2023 U.S. Store Opening Announcements
As of April, discounters announced store openings in the U.S., leading the year so far
Dollar General: 1,065 stores
Family Dollar (owned by Dollar Tree): 328 stores
Dollar Tree: 308 stores
Five or less: 199 stores
JD Sports: 134 stores
TJX Companies (including TJ Maxx, HomeGoods, Marshalls): 102 stores
Dolls: 100 stores
Burlington Stores: 96 stores
Ross Stores: 92 stores
Bath & Body Works: 92 stores
Tractor Supply: 70 stores
Source: Coresight Research data
Industry watchers expect retailers to expand at a similar pace this year, even as interest rates rise and the economy becomes more volatile.
According to Coresight’s Weinswig, several factors are driving demand for retail space: Retailers have more money in the wake of shoppers’ pandemic-induced spending frenzy. Companies see physical stores as billboards for their brands and fulfillment centers for e-commerce orders. Retailers are also adding technology to better understand customer behavior as privacy changes from Google and Apple make it harder to track them online. Mixed work schedules mean shoppers visit stores throughout the day.
Discount stores and outlets such as dollar general, dollar tree and TJX Corporation According to Coresight, they have big expansion plans in the works. They could be potential tenants depending on how the previous Bed Bath space was divided and diced.
The boxes vacated by Bed Bath may also be LA Fitness, Crunch and fitness planetAnd discount banners like TJX-owned HomeGoods and Marshalls, said Levin Management CEO Matthew Harding. The New Jersey-based company is a landlord-property manager with more than 100 properties in five states and Washington, D.C., and its properties include some former and current Bed Bath locations.
Even mall players can take a look. lockerFor example, the company is closing an estimated 187 stores in the U.S. by 2022, more than any other retailer, according to Coresight. However, Mary Dillon, the shoe company’s chief executive, talked up plans to open a new store in the strip center. Macy’s Stores outside of malls were also opened.
Think of it as the living circle of retail.
Jinke Real Estate, a real estate investment trust with 27 Bed Bath stores in its portfolio, said it already has single tenants poised to fill most of those locations. Through a spokeswoman, the company said it could not name them at this time, but they include discount stores, full-price stores, entertainment stores, grocery stores, furniture stores, and auto or electronics stores.
In a strip mall in the Phoenix area, one of Kimco’s former Bed Bath & Beyond locations recently reopened as a Burlington shop.
At a mall in Edgewater, New Jersey, a HomeGoods (owned by TJ Maxx owner TJX Companies) is moving into a former Bed Bath & Beyond, according to Levin Management.
In the state’s Bergen County, talks are underway to convert the two-story Bed Bath & Beyond into multiple properties, according to Rick Latella, executive managing director of Cushman & Wakefield’s retail valuation practice.
He said shopkeepers were close to striking deals with off-price retailers, ross store, one layer. On another level, possible tenants include REI, peko and Barnes & Noble.