Savvy Investors Plan Ways to Capitalize on Space Left Vacant by Big-Box Retailers
Savvy CRE investors are finding ways to capitalize on the space left vacant by big-box retailers that were unable to compete with e-commerce. From Toys “R” US to Winn-Dixie Supermarket, national retailers are closing stores around the country. The soon-to-be vacated stores could bring much needed retail space to the market, according to a recent report by the Marcus & Millichap research division, according to a recent report by the Marcus & Millichap research division.
For example, vacant Toys “R” Us stores will present companies with opportunities to broaden their footprint and gain market share in their respective industries. Fitness centers have been expanding at a rapid pace as they attempt to keep stride with the growing health-conscious community. Gyms act as a junior anchor for strip malls and power centers due to their propensity to increase foot traffic. Expanding grocery chains could potentially seek some of the dark locations as they are the ideal size for many companies. Grocer brands with traditionally larger layouts may also target the shuttered stores as they shift to smaller formats attempting to maximize sales per square foot. In 2017, supermarkets’ net store growth was the fifth highest out of 10 retail segments with 674 new locations. Discount retailers like Ross and T.J. Maxx are also feasible tenants as they have some locational flexibility due to their brand-based consumer appeal, according to the Marcus & Millichap report.
With retail continuing to evolve at a brisk pace, filling the vacant locations may require improvisation. The inability to occupy the entire space with one retailer may result in subdividing the space into multiple sections; however, bay depth could present a challenge. Converting retail assets to offices or last-mile distribution centers are also concepts that have generated interest in recent years as owners search for ways to adapt locations and maintain a steady revenue stream. For instance, the larger co-branded Toys R Us/Babies R Us stores, typically averaging about 65,000 square feet, could have particular appeal as last-mile fulfillment centers, depending on truck access, bay height and foundation structure capacity. Although uncertainty surrounding the filling of the eventually vacant locations is imminent, expect investors to capitalize on the new space coming to market and the demographics contributing to commercial real estate’s strength, according to the Marcus & Millichap report.