A Jos. A. Bank store in San Francisco announces final closure on August 6.
David Paul Morris / Bloomberg via Getty Images
While the pace of store closings has slowed from the high of 2019, don’t expect the delay to be long, according to a new UBS report suggesting America still has far too much retail space per capita.
At the end of last year, there were 115,000 shopping centers – a figure that includes strip malls, malls, outlet centers and other lifestyle centers – in the US, compared to 112,000 in 2010 and 90,000 in 2000, UBS found in an analysis using data from the International Council of Shopping Centers.
That equates to about 59 square feet of mall space per U.S. household, which is slightly less than 62 square feet in 2010, UBS said. But it’s still well above 55 square feet of space per household in 2000 and 14 square feet in 1990, analysts Michael Lasser and Jay Sole explained.
UBS estimates that approximately 80,000 stores, which is 9% of its total stores, will close nationwide by 2026. That assumes that ecommerce sales will account for 27% of total retail sales by then, up from 18% now.
“An enduring legacy of the pandemic is that online penetration has soared,” Lasser said in a note to customers. “We expect it to continue to grow, leading to further rationalization of stores, especially as some of the government’s unique support measures decline.”
Although more and more Americans are increasingly ordering everything from milk and bread to office chairs and sneakers on the Internet, store openings are for the first time in years ahead of closings. Many companies are seizing the moment to take advantage of cheaper rents and plenty of vacancy to choose from. The growth is largely due to retailers selling beauty, grocery and discount items, including Ulta, Dollar General, TJX and Lidl, anticipating a strong post-pandemic rebound in store visits.
According to data from Coresight Research, US retailers have announced 3,169 store closings and 3,535 store openings so far this year. The company tracked 9,832 closings in 2019 – the highest number since it started tracking this data. That figure has dropped to 8,741 in 2020.
UBS said retail has recently been buoyed by government stimulus and consumers shifting their dollars to goods of services, with travel and other entertainment events being interrupted due to the pandemic. But it said those trends will be short-lived, leading to a predicted drop in retail sales, resulting in a rebound in store closings.
UBS expects that most closings will take place at retailers selling clothing and accessories in the coming years. The company forecasts approximately 21,000 closings in this sector by 2026, with many of its shuttered stores located in closed malls.
The closures are expected to be the most modest in the home improvement, grocery and auto parts retail sector as these categories are less prone to damage from the rise of e-commerce, UBS said.
– CNBCs Micahel Bloom contributed to this report.