A wave of bankruptcies and closures in the retail sector will give way to a brighter future as other brands across industries look to expand, an analysis by Northmarq predicts.
Significant vacancies are expected both in the net lease retail and shopping center markets as tenants including Big Lots, Party City, CVS Pharmacy and Walgreens shutter locations. Some of the storefronts could remain vacant for the foreseeable future, said Northmarq.
But opportunistic tenants in growth mode will pluck the most attractive of those locations from the market, the report said. Northmarq pointed to brands including Ollie’s Bargain Outlet, Barnes and Noble, Burlington, Michaels and Haverty’s as retail brands that have recently acquired leases as other big box stores have closed.
“This strategy has allowed tenants to not only capitalize on high quality, high traffic sites, but also solves the challenge of expanding in a low vacancy market,” said Lanie Beck, senior director of content and marketing research at Northmarq.
Shopping center anchors and big box retailers exploring these opportunities will encounter stricter construction and branding guidelines associated with net lease retail properties. For example, Beck said a Dutch Bros Coffee would not explore a former Walgreens property as they look to identify potential locations over the coming years.
“Instead, it is more likely that shuttered freestanding and junior box locations will be targeted by tenants with more flexibility, such as independent businesses looking to serve their local consumer base from an upgraded location,” said Beck. “Redevelopment or demolition also becomes an option, especially for sites with good ingress/egress in high traffic areas. While a vacant CVS Pharmacy won’t solve the physical real estate requirements of a Chick-fil-A, for example, the site itself might justify a tear-down.”
Thousands of new stores and restaurants are expected to open over the next several years, led by quick service restaurants and convenience stores, which are sectors that are aggressively expanding, said Northmarq. Among the brands making significant growth pushes are Jack in the Box, Slim Chickens, Wawa and Sheetz. In addition, discount retailers like Five Below and Ross Dress for Less have announced growth plans, capitalizing on the increasingly cost-conscious consumer sentiment. Many retailers that have maintained their footprints recently, including Lowe’s and Walmart, have also signaled their intention to restart growth.