Bed Bath & Beyond: As Sears, Toys “R” Us, and Circuit City grappled with bankruptcy in recent years, a silver lining emerged for other retailers eyeing the potential of their vacated storefronts. Now, the focal point shifts to the vacant Bed Bath & Beyond stores, where a myriad of companies seizes the opportunity to extend their footprint into these prized locations.
Reflecting on this trend, Burlington Stores CEO Michael O’Sullivan noted earlier this year, “Some of our best stores were created from carved-up Kmart or Sears locations,” showcasing the successful repurposing of 44 former Bed Bath & Beyond spaces by Burlington.
This holiday shopping season marks a notable shift, with the absence of physical Bed Bath & Beyond stores for the first time in over 50 years. The chain succumbed to closure earlier this year, shuttering its final 360 stores and 120 buybuy BABY outlets in one of the most substantial retail bankruptcies in recent memory. (Overstock.com stepped in, acquiring Bed Bath & Beyond’s brand out of bankruptcy and relaunching it online, complete with the iconic 20% coupons.)
However, the hundreds of empty Bed Bath & Beyond stores, auctioned off as part of the bankruptcy proceedings, have become highly sought-after real estate for retailers and other enterprises eager to expand their reach.
Former Bed Bath & Beyond locations have been eagerly embraced by Burlington, Michaels, Barnes & Noble, Ollie’s Bargain Outlet, Macy’s, HomeGoods, and various other chains. Additionally, unconventional uses like indoor pickleball courts, trampoline parks, and bowling alleys have found a home in these vacancies.
Despite a slight dip in retail spending, former Bed Bath & Beyond stores remain in high demand due to a scarcity of new significant retail spaces. Since the 2008 financial crisis and the surge in online shopping, the construction of new retail spaces has been limited, resulting in historic lows in retail vacancy rates.
Bed Bath & Beyond’s locations, primarily situated in the suburbs of mid-size and large cities and under 50,000 square feet, are particularly appealing to retailers favoring smaller spaces. Some companies, such as Macy’s, capitalize on this trend by opening smaller “Market by Macy’s” versions within the vacant Bed Bath & Beyond stores.
While headlines about the “retail apocalypse” have dominated the narrative, brick-and-mortar stores continue to play a crucial role for many shoppers. The discount retail segment has seen substantial growth, catering to budget-conscious shoppers seeking competitive prices. Moreover, companies are leveraging physical stores for the efficient shipping of online orders, a strategy often more effective than delivering orders from warehouses. Even online-born brands, like Warby Parker, recognize the value of physical stores, establishing a brick-and-mortar presence.
The swift acquisition of Bed Bath & Beyond spaces at rents up to 50% lower than the previous occupants paid underscores the heightened demand. Landlords are seizing the opportunity by subdividing larger spaces into smaller ones to accommodate multiple tenants, ensuring minimal vacancy periods.
Kimco Realty, holding 26 former Bed Bath & Beyond leases, reported that new leases command a 38% premium over the previous rents. They have successfully leased 14 spaces to companies like Burlington and HomeGoods, with ongoing discussions with TJ Maxx, Ulta, REI, and others for the remaining 14 stores.
Burlington CEO Michael O’Sullivan emphasized the success of their approach, stating, “Many of our most successful and productive stores today were once upon a time Circuit City, Toys R Us, Sports Authority, Linens ’N Things.” The ongoing trend of repurposing retail spaces continues to shape the evolving landscape of brick-and-mortar establishments.