Bed Bath & Beyond removes its large blue signs, cleans the laundry aisles and closing hundreds of stores.
The company filed for bankruptcy on Sunday and said it would begin closing its remaining 360 Bed Bath & Beyond stores and 120 buybuy Baby stores. Bed Bath & Beyond has already closed 400 stores in the past year.
Already, channels whose TJ Maxx, Home items And Ross have recovered vacant stores. Burlington, Five Below, Nordstrom Rack and budget gym Planet Fitness could also fill spaces, according to retail owners and real estate analysts.
Bed Bath & Beyond’s real estate is a valuable and scarce resource for retailers, gyms and anyone else who needs ample space. There have been few new commercial developments since the 2008 financial crisis and the rise of online shopping, and vacancy rates are at historic lows.
“E-commerce has deterred a lot of people from building retail businesses,” said Brandon Isner, head of retail research at CBRE, a commercial real estate firm. “A lot of quality real estate will be available in a market where there have been no vacancies. It won’t take long for retailers to fill these spaces.
Particularly in a tight commercial real estate market, bad news for one brand means opportunity for another.
“For us, the biggest source of new store locations is from other retailers closing stores,” Burlington CEO Michael O’Sullivan said on a call with analysts in February. “A lot of our most productive venues used to be Circuit City or Toys ‘R’ Us or Sports Authority.”
Commercial construction and vacancy rates at record highs
Retail space is incredibly scarce right now, and it’s an ongoing trend: Total construction of new commercial buildings hit a new low in 2022 for the third year in a row, according to CBRE.
And for existing space, the commercial space vacancy rate fell to 4.9% at the end of 2022 – the lowest level since CBRE began tracking the market in 2005.
Bed Bath & Beyond therefore has a lot to offer potential tenants.
The company has stores in all 50 states, with most located in densely populated areas in California, Texas, New Jersey and Florida. Additionally, the majority of its stores are in the suburbs of medium and large cities and are under 50,000 square feet, which is an attractive quality in retail as brands. tendency to small spaces to save on rent, labor and other overhead costs.
“There is good interest in Bed Bath & Beyond stores closing given desirable locations” and an average size of around 30,000 square feet, retail analysts Telsey Advisory Group said in a note. to customers.
In some cases, landlords are also keen to replace old Bed Bath & Beyond leases because the company was paying below-market rent in some locations, Telsey Advisory Group analysts said.
What businesses are growing?
Bed Bath & Beyond has fallen into the “retail apocalypse” over the past decade, but many chains continue to grow.
Growth was more pronounced in the discount retail segment, as buyers on a tight budget are looking for low prices. Other businesses use their stores to ship online orders to customers, which can be more efficient than delivering orders from warehouses.
Indeed, despite high inflation and a decline in retail salesphysical store openings exceeded closings last year for the first time since 2016, according to Coresight Research.
And so far, store opening announcements have outpaced store closings this year, according to the company, with Dollar General, Family Dollar, Dollar Tree and Five Below leading the way.
But retailers aren’t the only ones looking for space and enjoying growth.
Discount Gym Planet Fitness opens approximately 200 new gyms per year.
“We are interested in the Bed Bath and Beyond locations and are exploring available opportunities with our franchisees,” a spokesperson told CNN. The company has already opened gyms in former stores of two brands that have filed for bankruptcy: Toys ‘R’ Us and Sears.
A real estate investment trust that owns nine Bed Bath & Beyond stores, Federal Realty, is currently in talks with chains like TJX, Burlington, Ross, Nordstrom Rack, Container Store and others about moving into Bed Bath & Beyond spaces. Once a deal is finalized, it typically takes 18-24 months for the new retailer to open.
“We’re feeling pretty optimistic based on the demand we’ve seen that we’ll be able to release all of these spaces to other retailers,” said Lance Billingsley, senior vice president of senior leasing for the company.
He also thinks Bed Bath & Beyond may not be able to avoid bankruptcy or liquidation, leading to more vacancies.
Meanwhile, another home goods retailer, Tuesday Morning, close more than 250 stores this year. A&G Real Estate Partners is auctioning the leases for the stores, which range from 10,000 to 20,000 square feet, said Mike Matlat, A&G’s senior managing director.
Discount chains are interested in moving into these spaces because they are small and already built up, Matlat said.
“With few new developments underway, everyone’s growth will come from the second-generation space,” he said.
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