new york
CNN
—
When Sears, Toys R Us and Circuit City filed for bankruptcy in recent years, it provided an opportunity for other retailers to move into older stores.
Now, retailers are jumping on board with vacant Bed Bath & Beyond stores.
“Some of our best stores have come out of Kmart and Sears stores,” Burlington Stores CEO Michael O’Sullivan said earlier this year. Burlington took over the 44 space that was once a Bed Bath & Beyond.
For the first time in more than 50 years, the Bed Bath & Beyond chain is without a physical store, after it went out of business earlier this year, closing its last 360 stores and 120 Bye Bye Babies stores in one of the largest retail bankruptcies in years. It’s holiday shopping season. (Overstock.com came out of bankruptcy when he acquired the Bed Bed & Beyond brand and relaunched it online with a 20% coupon.)
But hundreds of empty Bed Bath & Beyond stores that were auctioned off as part of bankruptcy proceedings have turned out to be coveted real estate for retailers and other businesses looking to expand.
Burlington, Michaels, Barnes & Noble, Ollie’s Bargain Outlet, Macy’s, HomeGoods and other chains replaced the old Bed Bath & Beyond stores. Indoor pickleball courts, trampoline parks and bowling alleys are also filling vacant spaces.
Former Bed Bath & Beyond stores remain popular despite a slight slowdown in retail spending. That’s because there aren’t that many large stores that can move in. Not much new retail space has been built since the 2008 financial crisis, and the rise of online shopping, retail and real estate professionals say they’ve all put a damper on construction.
As a result, retail vacancy rates are at historic lows.
The majority of Bed Bath & Beyond’s stores are located in the suburbs of medium-sized cities and are less than 50,000 square feet in area. These are attractive attributes for retailers, as some companies prefer smaller spaces rather than megastores because they save on rent and labor costs and shoppers buy more products online. Macy’s, for example, is opening a smaller version of Market by Macy’s in old Bed Bath & Beyond stores.
Although headlines about the “apocalypse of retail” have dominated the past decade, brick-and-mortar stores remain important to many shoppers.
Store growth has been most pronounced in the discount sector of retail, as shoppers on a budget seek lower prices. Other businesses use stores to ship online orders to customers, which can be more efficient than shipping orders from a warehouse. Brands that started online, like Warby Parker, have also opened stores.
According to commercial real estate investment firm CBRE, Bed Bath & Beyond space was quickly acquired at rents up to 50% of what Bed Bath & Beyond was paying. Brandon Isner, head of retail research for the Americas at CBRE, said homeowners are taking advantage of vacant units, and some are dividing former bed and bath spaces into smaller sizes.
“There is little concern that any of the spaces will be empty for an extended period of time,” he said.
Property owner Kimco Realty, which previously had 26 leases with Bed Bath & Beyond, said the new leases were 38% higher than Bed Bath & Beyond’s rent. Kimco has leased 14 spaces to companies such as Burlington and Home Goods, and is in talks with TJ Maxx, Ulta, REI and others for the remaining 14 stores.
“We have a very strong real estate team with extensive experience in retail insolvencies,” said Burlington CEO Michael O’Sullivan. “Many of our most successful and productive stores today were once Circuit City, Toys R Us, Sports Authority and Linens and Things.”