A shop downstairs. A. Bank of San Francisco announces its final closure on August 6.
David Paul Morris / Bloomberg via Getty Images
Although the pace of store closures has slowed since its peak in 2019, don’t expect the delay to take long, according to a new UBS report that suggests America still has far too much sales space per capita.
At the end of last year, there were 115,000 malls – a number that includes strip centers, malls, stores and other living centers – in the US, compared to 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 space in the U.S. household mall, which is just under 62 square feet in 2010, UBS said. But there is still well over 55 square meters of household space in 2000 and 49 square meters in 1990, analysts Michael Lasser and Jay Sole explained.
UBS estimates that approximately 80,000 retail stores, representing 9% of all stores, will close nationwide by 2026. This assumes that e-commerce sales will increase to 27% of total retail sales by then, growing compared to 18% at present.
“A lasting legacy of the pandemic is that online penetration has risen sharply,” Lasser said in a note to customers. “We expect it to continue to grow, which will lead to further streamlining of retail stores, especially as some of the government’s unique support measures decline.”
Even as more and more Americans order more from milk and bread to office chairs and sneakers on the Internet, store openings are outpacing closures for the first time in years. Many companies take advantage of this time to take advantage of cheaper rents and free space to choose from. The increase comes largely from retailers selling beauty products, food and discounts, including Ulta, General Dollar, TJX and Lidl, which anticipate a strong post-pandemic comeback in store visits.
U.S. retailers have announced 3,169 store closures and 3,535 store openings so far this year, according to data from Coresight Research. The company followed 9,832 closures in 2019 – the highest it has seen since it began tracking these data. This figure dropped to 8,741 in 2020.
UBS said the retail industry has recently been supported by government incentives and consumers who have shifted their dollars to goods from services, with travel and other entertainment events disrupted by the pandemic. But he said these trends will be short-lived, leading to an anticipated decline in retail sales, which will lead to an increase in the level of retail closing.
UBS anticipates that most closures will be found among retailers selling clothing and accessories in the coming years. The company forecasts approximately 21,000 closures in the sector by 2026, with many of the closed stores located in closed malls.
The closures are expected to be the most modest in the areas of home improvement, food and car parts retail, as these categories are less likely to be damaged as e-commerce grows, UBS said.
– CNBC Michalaeflourish contributed to this report.