The location of a Jos. A. Bank in San Francisco announces its permanent closure on August 6.
David Paul Morris / Bloomberg via Getty Images
Although the pace of store closings has slowed since its 2019 peak, don’t expect the reprieve to last long, according to a new UBS report that suggests the United States still has too much retail space per capita.
At the end of last year, there were 115,000 shopping malls – a number that includes strip centers, malls, outlet and other lifestyle centers – in the US, compared to 112,000 in 2010 and 90,000 in 2000, UBS found. in an analysis with data from the International Council of Shopping Centers.
That works out to about 59 square feet of mall space per home in the US, which is just under 62 square feet in 2010, UBS said. But it’s still well above 55 square feet of space per home in 2000 and 49 square feet in 1990, analysts Michael Lasser and Jay Sole explained.
UBS estimates that around 80,000 retail stores, which is 9% of total stores, will close nationwide by 2026. That assumes that e-commerce sales will increase to represent 27% of total retail sales by then, versus at the current 18%.
“An enduring legacy of the pandemic is that online penetration increased dramatically,” Lasser said in a note to clients. “We expect it to continue to rise, which will drive further rationalization of retail stores, especially as some of the government’s unique support measures wane.”
Despite more and more Americans ordering more and more of everything from milk and bread to desk chairs and sneakers online, store openings are outpacing closings for the first time in years. Many businesses are seizing the moment to take advantage of cheaper rents and ample available space to choose from. The growth is primarily driven by retailers selling discount, grocery and beauty products, including Ulta, Dollar General, TJX and Lidl, anticipating a strong post-pandemic rebound in store visits.
US retailers have announced 3,169 store closings and 3,535 store openings so far this year, according to data compiled by Coresight Research. The firm tracked 9,832 closings in 2019, the highest it has seen since it began tracking this data. That number fell to 8,741 in 2020.
UBS said the retail industry has been supported recently by stimulus from the government and by consumers shifting their dollars to service goods, with travel and other entertainment events on hiatus due to the pandemic. But he said those trends will be short-lived, leading to an expected slowdown in retail sales, resulting in a rebound in retail closings.
UBS anticipates that the majority of closures will be found among retailers that sell clothing and accessories in the coming years. The firm forecasts around 21,000 closings in this sector by 2026, with many of the closed stores located in closed shopping centers.
The closings are anticipated to be the most modest in home improvement, grocery and auto parts retail, as these categories are less susceptible to damage from the rise of e-commerce, UBS said.
– CNBC Michamel Bloom contributed to this report.