A Jos store. A. Bank in San Francisco announces its permanent closure on August 6.
David Paul Morris / Bloomberg via Getty Images
While the pace of store closings has slowed since the peak of 2019, don’t expect the postponement to last long, according to a new UBS report that suggests that America still has a lot of retail space per capita.
At the end of last year, there were 115,000 shopping centers – a number that includes strip centers, shopping malls, outlets and other lifestyle centers – in the United States, compared with 112,000 in 2010 and 90,000 in 2000, UBS found in an analysis. using data from the International Council of Shopping Centers.
That equates to about 59 square feet of shopping space per home in the U.S., which is just under 62 square feet in 2010, UBS said. But it is 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 about 80,000 retail stores, which corresponds to 9% of total stores, will close across the country by 2026. This assumes that e-commerce sales will increase to 27% of total retail sales by then, compared to 18% today.
“A lasting legacy of the pandemic is that online penetration has increased dramatically,” Lasser said in a note to customers. “We expect it to continue to increase, which will lead to further rationalization of retail stores, especially as some of the government’s exclusive support measures decline.”
While more and more Americans are asking for everything from milk and bread to office chairs and sneakers on the Internet, store openings are overtaking closings for the first time in years. Many companies are taking the time to take advantage of cheaper rentals and ample free space to choose from. The growth stems largely from retailers selling beauty, grocery and discount products, including Ulta, Dollar General, TJX and Lidl, who are predicting a strong post-pandemic recovery in store visits.
US retailers have announced 3,169 closings and 3,535 store openings so far this year, according to data compiled by Coresight Research. The company tracked 9,832 closings in 2019 – the largest ever seen since it started following that data. That number dropped to 8,741 in 2020.
UBS said the retail sector has recently been supported by stimulus from the government and by consumers shifting their dollars into service goods, with travel and other entertainment events paused due to the pandemic. But he said these trends will be short-lived, leading to an expected drop in retail sales, which will result in an increase in retail closings.
UBS predicts that the majority of closings will be found among retailers selling clothing and accessories in the coming years. The company is forecasting about 21,000 closings in this sector by 2026, with many of the stores closed located in closed malls.
The closures are expected to be the most modest in residential reform, food retailing and auto parts, as these categories are less susceptible to damage from increased e-commerce, UBS said.
– CNBC’s Michaandl Bloom contributed to this report.