The retail apocalypse visualized (it's not as bad as you think)

2 months ago by Joshua Fruhlinger in Features

This headline from Fox Business on March 8, 2019 would strike fear into the heart of anyone involved in the retail industry: "Retail Apocalypse: 4,810 closures in first three months of 2019". The data is, indeed, scary. Since the new year, Gap, JCPenney, Victoria's Secret, and Foot Locker have all announced store closures in the past few weeks.

The so-called "retail apocalypse" has been killing retail life for some time. While nearly 5,000 locations are shuttering in 2019 alone, 2018 saw massive closures that included industry stalwarts Toys R Us, Sears, and KMart, just to name a few. 2017 wasn't much prettier.

But data collated and tracked directly from REITs reveals an interesting, and, in many ways, contrarian story here.

That's because according to vacancy data since 2017, total empty space at America's top REITs (real estate investment trusts, or the landlords of retail) has been surprisingly steady, indicating that while stores have been closing, space is being taken over by other businesses.

By aggregating total vacant square footage for REITs since 2017, we see a steady inventory of open space since 2017, rather than a steady uptick as major retailers shut their doors.

The reason for this could be multifold. First, REITs have done a good job — so far — of finding other tenants for large spaces. In the case of Toys"R"Us, for instance, many of those huge spaces are already being leased out by tenants such as Round One Entertainment (a large entertainment center).

In other cases, REITs are finding businesses like Google who are looking for new office space, and converting retail into offices. In Louisville, Kentucky, after long-term tenant Macy's moved out of a massive space, a new tenant is already preparing to move in (see below).

This Macys in Louisville shut down last year. It's already under construction for a new tenant.

Meanwhile, REIT Macerich is converting the Westside Pavillion, a large shopping center in Los Angeles, into 500,000 feet of Google office space.

But those two areas — Louisville, KY and Los Angeles, CA, are thriving business districts.

In other areas, especially in the southeast, REITs appear to be having a harder time filling space, as the data over time shows. Three snapshots from today's date, this date a year ago, and then again the year previous show vacant REIT space among the largest landlords. When seen together, a particular pattern emerges.

2017 vacant space

2018 vacant space

2019 vacant space

Southern discomfort (and Maryland malaise)

Cumulative retail vacancies put Florida at the top of the list, followed by California and Texas. Of the top-10 states with the most retail vacancies, 6 are below the Mason-Dixon line.

State (Stores)

Is Vacant (Count)

FL

526,249

CA

364,039

TX

314,736

VA

307,743

MD

271,752

GA

243,955

IL

174,662

NY

158,526

NC

142,539

When looking at retail vacancies by city, Miami and Houston lead the list. Interestingly, three Maryland cities — Rockville, Baltimore, and Gathersburg — are in the top-10.

City (Stores)

State (Stores)

Is Vacant (Count)

Miami

FL

68,639

Houston

TX

63,077

Rockville

MD

36,975

Dallas

TX

35,356

Atlanta

GA

31,612

Baltimore

MD

30,421

Gaithersburg

MD

29,279

Raleigh

NC

26,623

Orlando

FL

25,669

Jacksonville

FL

24,241

Rock Hill

SC

23,517

Falls Church

VA

21,989

Philadelphia

PA

21,717

Richmond

VA

21,515

Vernon Hills

IL

21,292

BAYAMÓN

PUERTO RICO

20,108

St. Petersburg

FL

19,618

Chantilly

VA

19,292

Ashburn

VA

18,718

Daly City

CA

18,243

Futher reading:

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Joshua Fruhlinger

Joshua has been writing about technology, lifestyle, and business for over 20 years. He's one of the original writers and editors for Engadget, and still writes a...

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