Who Is Taking the Vacant Toys"R"Us Stores? - Coresight Research
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
July 17, 2018
Who Is Taking the Vacant Toys“R”Us Stores?
• With June 29 marking its final day in business in its home market, Toys“R”Us has
now closed down all of its stores in the US. The impact of the toy retailer’s departure
on US retail is significant. We estimate 28.6 million square feet of retail space has
been left vacant with the closure of Toys“R”Us, and in terms of the number of
stores, this represents 21% of total store closures announced year to date in the US.
• The vacant Toys“R”Us stores look set to be filled by a diverse array of tenants such
as discount stores, health and wellness, specialty grocers, home improvement,
furniture, arts and crafts and entertainment. Brands including Dollar General are
likely take on parts of vacant stores, since they tend to operate smaller store formats
and are unable to fill an average Toys“R”Us store.
• According to real estate investment firm and owner of several former Toys“R”Us
stores Kimco Realty, some of the likely candidates to fill the vacant spaces left
behind by the toy retailer include Dollar General, TJ Maxx and Burlington, together
with organic grocery retailer Sprouts Farmers Market, foodservice retailers such as
KFC and Chipotle and healthcare service provider GoHealth Urgent Care.
A Significant Mark Left on US Retail
Toys“R”Us first filed for bankruptcy protection in September 2017, and June 29, 2018
marked its final day in business in its home market.
The toy retailer operated 881 stores in the US as of October 28, 2017, according to
company reports. Most of these were big-box formats with an average store gross size of
32,500 square feet, according to market research firm eMarketer. Given these numbers,
we estimate the closure of the Toys“R”Us retail chain has left 28.6 million square feet of
retail space vacant in the US commercial property market.
Deborah Weinswig, CEO and Founder, Coresight Research
deborahweinswig@fung1937.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 1
Copyright © 2018 Coresight Research. All rights reserved.
July 17, 2018
Figure 1. Toys“R”Us: Former Store Locations in the US
Red dots represent Toys“R”Us stores; yellow dots represent Babies“R”Us stores.
Source: Thinknum
The impact of the toy retailer’s closure on US retail is significant, even in absolute store
numbers. In our Weekly Store Openings and Closures Tracker 2018 #27, we reported that
Toys“R”Us topped the list of retailers in terms of store closures announced year to date,
representing 21% of total store closures in the US.
Which Retailers Will Be Taking Over the Toys“R”Us Stores?
Earlier this month, The Wall Street Journal reported that some of the vacant Toys“R”Us
retail space would be taken over by furniture retailers Big Lots and Scandinavian Design,
arts and craft retailer Hobby Lobby, off-price retailer Burlington and off-price department
stores TJ Maxx and Marshalls (both owned by TJX Companies).
Toys“R”Us stores were either owned directly by the retailer, or leased back to Toys“R”Us
Property Co., a separate entity created by the retailer. Other stores were owned by real
estate investment trusts (REITs), including Kimco Realty, Brixmor and DDR. Respective
company reports by these firms have given us further indications of the retail names likely
to take over the Toys“R”Us vacancies.
Kimco Realty
On its 1Q18 earnings call, Kimco Realty CEO Conor C. Flynn said that the toy retailer’s
former locations were already seeing significant demand from other retailers in categories
including off-price, health and wellness, specialty grocery, home improvement, furniture,
arts and crafts and entertainment. Moreover, the REIT noted the growing demand for
former Toys“R”Us spaces from other entities such as co-working facilities, hospitality
groups and medical facilities.
The green circle in Figure 2 shows the retail brands that are expanding their store
presence in the space owned by Kimco Realty, replacing the retracting retailers shown in
the blue circle, which include Toys“R”Us. Among the names in the green circle, we can see
Dollar General, TJ Maxx and Burlington, together with organic grocery retailer Sprouts
Farmers Market, foodservice retailers such as KFC and Chipotle and healthcare service
provider GoHealth Urgent Care.
Deborah Weinswig, CEO and Founder, Coresight Research
deborahweinswig@fung1937.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 2
Copyright © 2018 Coresight Research. All rights reserved.
July 17, 2018
Figure 2. Kimco Realty: Closures vs. Openings, by Retail Brand
Source: Kimco Realty
DDR
On DDR’s 1Q18 earnings call, President and CEO David R. Lukes stated that the challenges
the Toys“R”Us bankruptcy were generating for DDR would be partially mitigated by
renting part of these spaces to smaller shops, which indicates that vacant Toys“R”Us
stores would likely be partitioned off and occupied by smaller retailers. For example,
Dollar General’s average store gross size is 9,100 square feet, according to eMarketer, less
than one-third the gross size of an average Toys“R”Us store.
Lukes went on to say that the vacancy of big-box retail spaces resulting from Toys“R”Us
closures also represented an opportunity to undertake economically attractive
redevelopment projects, as it would allow DDR to recapture control of space and parking
fields.
Key Takeaways
The closure of the Toys“R”Us store chain leaves a significant mark on US retail. The total
number of stores closed represents 21% of total store closure announcements in the US
market year to date. The retailer, which used to operate big-box stores, has left behind
substantial vacant space in the US commercial property market.
This space is likely to be partitioned off and taken over by retailers that operate smaller
store formats and even by nonretail businesses such as co-working facilities, hospitality
groups and medical facilities. Retailers that are likely to take on the vacant space include
discount retailers such as Dollar General, organic grocery retailers, foodservice retailers
and even healthcare providers.
Deborah Weinswig, CEO and Founder, Coresight Research
deborahweinswig@fung1937.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 3
Copyright © 2018 Coresight Research. All rights reserved.July 17, 2018
Deborah Weinswig, CPA
CEO and Founder
Coresight Research
New York: 917.655.6790
Hong Kong: 852.6119.1779
China: 86.186.1420.3016
deborahweinswig@fung1937.com
Filippo Battaini
Analyst
Hong Kong:
6/F, LiFung Tower
888 Cheung Sha Wan Road, Kowloon
Hong Kong
London:
242–246 Marylebone Road
London, NW1 6JQ
United Kingdom
New York:
1359 Broadway, 18th Floor
New York, NY 10018
Coresight.com
Deborah Weinswig, CEO and Founder, Coresight Research
deborahweinswig@fung1937.com US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 4
Copyright © 2018 Coresight Research. All rights reserved.You can also read
