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Marcus & Millichap, JLL, Federal Realty Retail Experts Weigh in on Impact of Closing 4,500 Stores

We believe that it is essential for you to stay informed about the

growing shift in the way consumers are shopping and how it will impact the industry.

Photo Courtesy of Connect Commercial Real Estate.

The retail sector is experiencing significant shift, and the impact is being felt across the industry as stores close, chains file for bankruptcy and malls seek ways to navigate a new journey.

An additional 465 stores including Gap, JCPenney, Victoria’s Secret and Foot Locker were added to the closure list that has grown to more than 4,500. To be sure, it is reflective of the larger issues that the sector must address to survive, yet industry experts say to look beyond the negative headlines to find a different picture.

James Cook - JLL, Americas Director of Research, Retail

Shoppers simply have carved out separate shopping journeys to focus on value retail, convenient delivery and click-and-collect, or higher margin high-touch specialty and luxury retail. “Retailers that don’t fit into the value, convenience or high-touch categories will have to change,” says Cook. “Those that are unable to change are in real trouble.” “We will all need to become specialists in transition. Experts in understanding where the new shopper wants to go, what she wants to buy and where she wants to buy it. Experts in the New Retail.”

Jeff Kreshek - Federal Realty Investment Trust, SVP, Leasing

These closings are absolutely necessary for the brands and the industry in the long term. The way people transact has fundamentally changed over the last decade, and as a result, retailers need fewer stores. He believes the first locations likely to go will be locations where the projects themselves have likely lost some relevance with the consumer.

Scott M. Holmes - Marcus & Millichap, SVP, National Director, Retail

Holiday sales were the best in nearly a decade. Many retailers such as Target, Ulta, Hobby Lobby, TJX and AtHome continue to expand. There’s a growing list of digitally-native retailers that have big plans to expand into physical stores. “With extremely limited new construction in retail over the last decade, supply-demand fundamentals remain very strong in retail,” says Holmes. “We are seeing good rental rate growth across the country for well-located retail centers.” “Retailers such as Hobby Lobby and T.J. Maxx (TJX) have been frustrated by the limited number of available spaces for their size, and the cost of new construction has not worked for them, so these recent closures provide a good “release valve” for them.”

So, what does this all mean? Cook predicts, this isn’t an end, just the start of a new beginning. Retail is not going away, it’s just changing.

2019 Connect Commercial Real Estate.

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