A closed Bed Bath & Beyond store in San Francisco, California, U.S., Monday, April 24, 2023.
David Paul Morris | Bloomberg | Getty Images
In malls across the country, Bed bath and beyond stores have “Closing Soon” signs.
For other retailers, it may also be “For Rent” signs.
The home goods retailer, which filed for bankruptcy on Sunday, will not only create opportunities for competitors to win new customers and market share. Its shuttered stores will trigger a land grab for retailers hungry for extra space.
Bed Bath will join a list of other bankrupt businesses, such as Kmart and Sears, which freed up space and made way for stores. Bed Bath has nearly 500 locations that could open — between its 360 namesake stores and 120 Buy Buy Baby locations — for other businesses to rent. It had already closed many locations, closing 150 underperforming namesake stores and closing all 49 locations of its Harmon FaceValue beauty chain.
The company’s stores remain open and its website is still functioning. Clearance sales started this week.
Still, the upcoming Bed Bath closings come at the right time, according to property companies and retail industry watchers. The retailer has locations in high-traffic suburban areas. Its stores are easily adaptable to their size – usually around 30,000 square feet, according to industry analysts. Non-mall mall vacancy rates are low and demand is high, especially as discounters expand and traditional mall players experiment with new concepts.
Former Bed Bath stores could transform into a variety of other retail spaces, said Deborah Weinswig, CEO of Coresight Research, a retail advisory group. They could become medical practices for SVC Or Walgreensas drugstore chains move into primary care or transform into grocery stores for growing chains such as Aldi or Lidl, she said.
Some may be split into locations for multiple businesses. Others can be backfilled by a single tenant.
Bed Bath spaces are more move-in ready than Kmart and Sears locations because overall they were better maintained, while top-performing stores “only need a little light dusting” , she said.
“In the past, maybe I was a little more worried if we had to go through something like this, but I’m just not,” Weinswig said. “I’m not worried at this point due to the fact that you’ve had this huge change in terms of demand for physical spaces.”
An appetite for space
Bed Bath & Beyond stores will go into the market as the non-mall space is hot and shoppers are flocking to the stores.
The locations of weaker retailers have thinned out during the fallout from the Great Recession and again during the Covid pandemic, said James Bohnaker, senior economist at Cushman & Wakefield. Now, a mix of stronger retailers are vying for space in similar malls, including dollar stores, discount retailers, direct-to-consumer players like Warby Parker and Casper, and traditional mall retailers like Macy’s.
The shopping center vacancy rate fell to 5.6% in the first quarter of this year, the lowest level since commercial real estate firm Cushman & Wakefield began tracking in 2007. These locations, which often include a large grocer and businesses like gyms and restaurants, have grown in popularity due to their convenience and proximity to growing communities, new subdivisions and wealthier shoppers.
Commercial real estate had a banner year in 2022 in the United States, as store openings exceeded closings for the first time since 2016, according to Coresight Research.
Major retailers opened about 2,500 net new stores in the United States in 2022, the company found.
Announcements of store openings in the United States since the beginning of 2023
Since April, discounters are leading the way so far this year with store openings announced in the United States
Dollar General: 1,065 stores
Family Dollar (part of Dollar Tree): 328 stores
Dollar Tree: 308 stores
Five below: 199 stores
JD Sports: 134 stores
TJX Companies (includes TJ Maxx, HomeGoods, Marshalls): 102 stores
Wawa: 100 stores
Burlington stores: 96 stores
Ross stores: 92 stores
Bath & Body Works: 92 stores
Supply of tractors: 70 stores
Source: data from Coresight Research
Industry watchers expect retailers to grow at a similar pace this year, even as interest rates rise and the economy gets choppier.
According to Coresight’s Weinswig, several factors are driving demand for retail space: Retailers have more cash after the pandemic-fueled shopper spending spree. Businesses view brick-and-mortar stores as billboards for their brands and distribution centers for their e-commerce orders. Retailers are also adding technology to better understand customer behavior as Google and Apple’s privacy changes make it harder to track them online. And hybrid working hours mean shoppers visit stores throughout the day.
Discounters and off-price players, such as General dollar, dollar tree And TJX Companies are leading the way with major expansion plans, according to Coresight. They could become potential tenants, depending on how old Bed Bath spaces are sliced and diced.
The boxes liberated from Bed Bath could also be ideal places for gym chains such as LA Fitness, Crunch and Planet Fitness, as well as off-price banners like HomeGoods and Marshalls, owned by TJX, said Matthew Harding, CEO of Levin Management. The New Jersey-based company is a property owner and manager with more than 100 properties in five states and Washington, DC. Its properties include some former and current Bed Bath locations.
Even mall players can take a look. Foot locker, for example, closed about 187 stores in the United States in 2022, more than any other retailer, according to Coresight. The shoe company’s CEO, Mary Dillon, however, spoke of plans to open new mall locations. Macy’s also opened stores beyond malls.
Think of it as the life circle of retail.
Kimco Real Estate, a real estate investment trust with 27 Bed Bath stores in its portfolio, said it already has sole tenants to fill most of those locations. Through a spokesperson, the company said it could not yet release names, but they included a mix of discount, full-price, entertainment, grocery, furniture and automobiles or appliances.
In a Phoenix-area strip mall, one of Kimco’s former Bed Bath & Beyond locations recently reopened as a Burlington store.
At a strip mall in Edgewater, New Jersey, a HomeGoods (owned by TJ Maxx, owner of TJX Companies) is moving into a former Bed Bath & Beyond, according to Levin Management.
At a Bergen County location in the state, negotiations are underway to turn a two-story Bed Bath & Beyond into multiple properties, according to Rick Latella, executive managing director of Cushman & Wakefield’s retail appraisal practice. .
He said the owner is close to a deal with an off-price retailer, Ross Stores, for one floor. And on the other floor, possible tenants include REI, petco and Barnes & Noble.