Mar 21, 2018

1 in 5 U.S. retail shops are still at risk

Claire's filed for bankruptcy on March 19. Photo: Justin Sullivan / Getty.

Amid a retail bloodbath last year and the first two months of 2018, the U.S. still has far too many shops, and their numbers need to shrink — 1 out of 5 need to close to reach the historical average, according to Costar, a research firm.

By the numbers: Ryan McCullough, senior real estate economist with Costar, said the U.S. has 18% too much retail space when compared with the historical average.

  • To return to where they should be, U.S. retailers would need to maintain current sales, but close almost 1.6 billion square feet of selling space.
  • "We aren’t predicting that is going to happen, but it does explain why closures are so prevalent today!" McCullough said in an email exchange.
  • In fact, Cushman & Wakefield, the real estate brokerage firm, is forecasting that 12,000 stores will close in the U.S. this year, up 33% from the 9,000 that were shuttered in 2017.

Looking at the trend: David Berliner, a partner with BDO, tells Axios that shopping today requires fewer stores, and that may be a healthy thing for retailers. Prior to Amazonization, the formula for retail sales growth was to build more stores, he said. Now, retailers can grow using a combination of on-line and physical shopping — what the industry calls "omni-channel."

  • "You just need a few stores for returns and to show merchandise," Berliner said.

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