Bed Bath & Beyond store closures will trigger land grabs by fast-growing retailers

Bed Bath & Beyond has signs in strip malls all over the country that indicate that the stores are "closing soon."

‍

In terms of other retailers, it would be equivalent to putting up a "For Rent" sign.

‍

With the bankruptcy filing of the home goods retailer, which was filed on Sunday, a number of competitors will have the opportunity to gain new customers and market share from the announcement. Due to the closure of its stores, it will trigger a land grab by retailers desperate to expand their footprints.

‍

Bed Bath and Beyond are the latest in a long list of bankrupt companies that have vacated spaces and allowed for store openings, such as Kmart and Sears. The Bed Bath & Beyond company owns nearly 500 locations, between its 360 namesake stores and 120 locations that are owned by the Buy Buy Baby company, that could be rented by other companies. Many of its locations had already been shuttered, as it had closed 150 underperforming locations of its namesake chain and all 49 outlets of its Harmon FaceValue beauty chain, both of which had been struggling financially.

‍

Stores of the company have remained open, and the company's website remains active. It was announced this week that liquidation sales would begin.

‍

Bed Bath & Beyond's upcoming closures are reported to be coming at a good time, according to real estate firms and retail industry watchers who have been following the company. Several of the retailer's locations can be found in high-traffic suburban areas. Based on industry analysts' estimates, Target's stores typically have 30,000 square feet of space, which makes them easily adaptable to a variety of business environments. As discounters grow and traditional mall players experiment with new concepts, it is likely that off-mall shopping centers will experience a low vacancy rate and a high demand.

‍

Deborah Weinswig, CEO of Coresight Research, a retail advisory group that specializes in retail strategy, said that former Bed Bath & Beyond stores could be turned into a variety of other types of retail space. Depending on what happens with CVS and Walgreens, they could turn into doctors' offices for the drugstore chains as they push into primary care, or they could become grocery stores for growing chains like Aldi and Lidl as they expand into primary care.

‍

In some cases, the same location may be used by multiple companies at the same time. As for others, they may be backfilled by a single tenant.

‍

Compared to Kmart and Sears, Bed Bath & Beyond's spaces are more ready for moving into because they have generally been maintained better, while the better-performing stores "require just a little light dusting," according to her.

‍

“I might have been a bit more concerned in the past if we were to undergo something like this, but I am just not concerned today,” Weinswig said. "I am not worried at this point because I think you have seen a tremendous change in the demand for physical spaces over the last couple of years."

‍

Space-hungry

‍

There is a strong demand for off-mall space, and shoppers are flocking back to stores, so Bed Bath & Beyond will put its stores on the market.

‍

Cushman & Wakefield's senior economist James Bohnaker said that weaker retailers' locations dwindled during the Great Recession and the Covid pandemic, respectively. Now, strong retailers, such as dollar stores, off-price retailers, direct-to-consumer brands like Warby Parker and Casper, as well as traditional mall retailers like Macy's, are vying for space in similar strip centers.

‍

Shopping center vacancy rates fell to 5.6% in the first quarter of this year, the lowest level since Cushman & Wakefield began tracking in 2007. Due to their convenience and proximity to new subdivisions, growing communities, and wealthier shoppers, such locations often include a major grocery store and other businesses.

‍

For the first time since 2016, Coresight Research reported that retail real estate had a banner year in 2022 in the U.S.

‍

There will be about 2,500 net new stores opened by major retailers in the United States in 2022, according to the firm.

‍

Retailers are expected to increase their sales at a similar rate this year, regardless of the rise in interest rates and uncertainty regarding the economy.

‍

The reason for the increase in retail space demand is attributed to a number of factors, according to Coresight's Weinswig. Retailers have more money after shoppers went on a pandemic-induced spending spree. Brick-and-mortar stores are seen by companies as both billboards for their brands as well as fulfillment centers for e-commerce orders they have placed. In addition, retailers are also adding software to help them understand their customers' behaviors better in the digital age as Apple and Google's privacy changes have made it more difficult to track them online. Also, since shoppers tend to have hybrid work schedules, they are more likely to visit stores all day long.

‍

There are a lot of discounters and off-price players that are leading the way in terms of expansion plans, such as Dollar General, Dollar Tree, and TJX Companies, according to Coresight. This sector has grown dramatically in recent years. It is possible that they could become potential tenants, depending on how the former Bed Bath and Beyond spaces are divided and segmented.

‍

The vacated Bed Bath boxes could also be an ideal location for gym chains such as LA Fitness, Crunch, and Planet Fitness, as well as off-price banners such as HomeGoods and Marshalls which are owned by TJX, said Matthew Harding, CEO of Levin Management. The company is a landlord and property manager based in New Jersey, with more than 100 properties located in five states and Washington, D.C. Its properties include some former and current Bed Bath and Beyond retail establishments.

‍

There is even a possibility that all players will take a look at this. Among the US retailers, Foot Locker, for instance, has closed a total of 187 stores, more than any other retailer, according to Coresight, in 2022. The CEO of the company, Mary Dillon, has, however, expressed her interest in opening new stores in strip centers in the future. There have also been stores that have been opened outside of malls by Macy's.

‍

As a matter of fact, you could consider it to be retail's circle of life.

‍

Kimco Realty, a real estate investment trust that owns 27 Bed Bath & Beyond stores out of its portfolio, stated that it already has single tenants teed up to fill most of those locations in the near future. An official from the company said that it could not yet disclose the names of the stores, but it said that they include a combination of off-price, full-price, entertainment, grocery, furniture, and automotive or appliance stores.

‍

Kimco recently opened a new Burlington store in a former Bed Bath & Beyond location in a strip mall in the Phoenix area, which was previously a Bed Bath & Beyond store.

‍

The Levin Management Company reports that there will be a HomeGoods store in one of the shopping centers in Edgewater, New Jersey that is owned by T.J. Maxx's parent company, TJX Companies, which has previously owned Bed Bath & Beyond.

‍

The transaction to turn a two-story Bed Bath & Beyond in Bergen County, New Jersey, into multiple properties is currently in the process of being negotiated, according to Rick Latella, executive managing director in Cushman & Wakefield's retail valuation practice in the state.

‍

There have been talks between the owner and off-price retailer Ross Stores about a deal for one floor of the building. As for the other floor, there are possibilities for REI, Petco, and Barnes & Noble to lease space there.