At Coresight Research, we have been tracking store closure and opening announcements every week for the past two years and, so far this year, store closures continue to outpace openings. While 2017 was thought to be a watershed year in retail, with a nearly unprecedented 7,066 store closures announced during the year and more than 15 major retail bankruptcies, in 2018 so far, we have actually seen an increase in the number of announced closures versus the comparable period last year. There were 3,296 store closures announced year to date through May 7 last year; this year through May 5, retailers have announced 3,889 store closures.
Every Retail Category Is Being Disrupted
What’s different this year is that store closures have been much less concentrated among soft goods retailers, as every category is seeing disruption, including toys, jewelry and home goods. In 2017, apparel and shoe retailers—including fast-fashion, teen, children’s, shoe and department store retailers—had announced a total of 2,491 store closures as of early May, making up 76% of the total closures year to date. In 2018, apparel and shoe retailers have announced 1,150 closures as of early May, accounting for just 29% of all closures so far this year.
Announced Store Closures, by Category (Jan 1–May 7, 2017 vs. Jan 1–May 5, 2018)
Retail Apparel Disruption: A Closer Look
Diving deeper into the apparel and shoes category, we see that, in 2017, department store retailers had announced 467 store closures as of early May. So far this year, department stores have announced 383 closures, a reduction of 18%. Shoe store closings fell from 560 in early 2017 to 185 in the comparable period in 2018—a reduction of 67%—and teen retailer closures dropped from 681 in early 2017 to 60 in the comparable period this year, a 91% drop.
Softlines-Related Store Closures (Jan 1–May 7, 2017 vs. Jan 1–May 5, 2018)
What Do These Shifts Mean for Malls?
The changes across retail that are prompting store closures are also creating opportunities for mall owners in terms of leasing options and retail collaborations that might not have existed in the past. Mall operators looking to fill spaces left vacant by retailers are making bolder choices and showing more flexibility and creativity in terms of leasing. Many are choosing to incorporate food halls, grocery stores and even residential apartments into their properties in order to attract customers.
We see the following as particularly bright opportunities for U.S. malls in 2018:
Food halls: Food halls are not just upgraded food courts, but spaces that offer products made by local artisans, food-oriented boutiques, butcher shops and, usually, interactive elements such as entertainment offerings and classes. Examples of successful food halls include Eataly, Le District and China Live.
Food halls are sprouting up in malls all over the U.S., replacing traditional anchor stores at many properties. They make properties sought-after acquisition targets by driving traffic and increasing their value, according to Garrick Brown, VP of Retail Research for the Americas at Cushman & Wakefield. Brown predicted at the 2017 ICSC RECon event that total food hall square footage will double from 3 billion to 6 billion in the next 5–10 years. Cushman & Wakefield started tracking food halls in 2015, when there were 70 projects under way. As of the end of 2017, there were 118 under construction, and by the end of this year, there will be 180, according to the company’s research. The company predicts that by the end of 2020, there will be 300 food halls in the U.S.
Number of Food Halls in the U.S.
Flexible spaces and leasing structures: Flexible, short-term leasing solutions are giving retailers opportunities to test products in new markets and geographies. The retail equivalent of an Airbnb, a short-term lease gives a retailer the opportunity to keep product fresh, relevant and exclusive via a limited-edition offering that is available only for a short amount of time.
Appear Here, one of the largest online marketplaces for short-term retail space, has partnered with Simon Property Group to create a new shopping experience called The Edit inside one of the country’s largest malls, Roosevelt Field on New York’s Long Island. The Edit features a rotating selection of 12 independent brands. This short-term, modular buildout and leasing structure is one that other malls may consider.
ThisOpenSpace is a short-term leasing solution that offers pop-up retail spaces to help brands with product launches, marketing activations and collaborations. Brands and retailers can use the site to find pop-up spaces for events, shops and photo shoots, and book by the day or month. The company has worked with Nike, Lexus, Everlane, Knix, Casper, Lululemon, IKEA and Herschel.
More diverse anchors: In place of department stores, new mall anchors include discount and fast-fashion stores, small-format boutiques, apartments, hotels, classrooms and fitness areas. GGP has invested more than $2 billion to redevelop some 115 of its properties, and it is bringing in new types of stores that offer more experiential shopping, such as Indochino, Untuckit and Forever 21’s Riley Rose. In Seattle, GGP is also adding living spaces to its malls in partnership with residential REIT AvalonBay. Another major REIT, Seritage Growth Properties, announced in October 2017 that it would convert part of its Sears store in Orland Park, Illinois, into a 10-screen AMC movie theater.
I am looking forward to continuing to track how store closures are actually creating new opportunities for mall owners and retailers to think collaboratively and creatively.
