Department Store Closures Are Just Getting Started, Says Real Estate Expert

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Anchor store mainstays like Sears, Macy’s, and JCPenney have already been closing stores to cut costs and adapt to shoppers’ changing needs, but one prominent real estate analyst says this culling of department stores is far from over, and that even the most popular malls will likely end up with just one or two traditional anchor retailers.

This is according to research firm Green Street Advisors, whose latest retail report is the subject of a story in today’s Wall Street Journal.

The firm had previously estimated in 2016 that 800 major department store locations would need to be shut down for these chains to remain afloat.

Department stores are indeed trimming their retail footprint, but Green Street believes that additional closures will likely be needed.

“Just a year later, the 800 number looks much too light on a strict sales productivity standpoint and is much lower than what will ultimately be needed as the industry will likely need to massively rationalize its store count as it reinvents its business model,” writes Green Street, which also predicts a drastic change in the standard model for how malls are structured.

“The era of a mall anchored by four department stores is coming to an end,” reads the report. “One or two such stores per mall is the most likely future.”. Sears, Macy’s, and JCPenney, the retailers that probably anchor at least one mall near you, have closed hundreds of stores this year, citing less mall traffic and slow sales of clothing.

Sears has reportedly started quietly closing local stores without releasing lists to the national media again. All publicly traded department store chains reported falling first-quarter sales, marking even more bad news for that business model.

In 2016, Green Street estimated that Sears will have to shed 43% of its physical stores to survive, and JCPenney would need to close 31%.

People are still buying things and staying clothed, but have shifted their shopping online while spending money on things like travel, meals out, and entertainment experiences. That means malls have to catch up quickly.

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