A place of business of Jos. A. Bank in San Francisco announces its final closure on August 6th.
David Paul Morris / Bloomberg via Getty Images
Although the pace of store closings has slowed from its 2019 high, you shouldn’t hold out long, according to a new UBS report that suggests America still has way too much retail space per capita.
At the end of last year, there were 115,000 malls in the US – including strip malls, malls, outlet and other lifestyle centers – compared to 112,000 in 2010 and 90,000 in 2000, according to UBS in an analysis based on US data stated the International Council of Shopping Centers.
That’s about 59 square feet of retail 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 per household in 2000 and 49 square feet in 1990, analysts Michael Lasser and Jay Sole explained.
UBS estimates that around 80,000 retail stores will close nationwide by 2026, which is 9% of total stores. This assumes that e-commerce sales will be 27% of total retail sales by then, up from 18% today.
“A lingering legacy of the pandemic is that online penetration has risen sharply,” Lasser said in a statement to customers. “We expect it will continue to grow, which will further streamline retail stores as some of the government’s unique support efforts wane.”
Although more Americans are ordering everything from milk and bread to desk chairs to sneakers online, store openings are surpassing closings for the first time in years. Many companies are taking advantage of the moment to take advantage of cheaper rents and sufficient free space to choose from. The growth is largely due to retailers selling beauty, grocery and discount goods, including Ulta, Dollar General, TJX and Lidl, who expect a strong post-pandemic rebound in store visits.
According to 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 level since this data began. That number fell to 8,741 in 2020.
UBS said the retail industry has recently been backed by government incentives and consumers shifting their dollars to goods from services, with travel and other entertainment events paused due to the pandemic. However, these trends are short-lived and would result in a projected decline in retail sales, which will lead to an increase in retail closings.
UBS expects most of the closings to be found at retailers selling clothing and accessories in the years to come. The company forecasts around 21,000 closings from this sector by 2026, with many of the closed stores being in closed shopping malls.
The closings in home improvement, grocery and auto parts retail stores are expected to be the most modest as these categories are less prone to the rise of e-commerce, UBS said.
– CNBC’s Michael Bloom contributed to this report.