As store closures at major retailers have swept the country recently, indicating trouble for brick-and-mortar stores, the Bay Area has mostly been spared.
But retail experts say that may not be the case for long.
The Bay Area is certain to see more big-box mall anchors like Macy’s and JCPenney close, said Jeff Badstubner, senior vice president at real estate firm JLL, but the strength of the market here will probably slow down the process. Those retailers also own much of their real estate or have complicated leases, so closing stores is a long process.
A number of retailers have announced store closures lately. The most recent news comes from office supply giant Staples, which said it will close 70 stores this fiscal year, following a $548 million loss and a 3 percent decline in sales in the fiscal quarter that ended in January. The retailer had already closed 48 stores last year and about 350 stores over the past five years.
Other retailers, including Urban Outfitters and Dick’s Sporting Goods, recently posted disappointing fourth-quarter sales. JCPenney has said it will close 140 stores, Sears Holdings plans to close 150 Sears and Kmart stores, and Macy’s said earlier this year it will close 68 stores and slash thousands of jobs, with more closures to come. The Limited said in January it will close all of its remaining stores.
The Bay Area has largely been left off the list of closures so far, besides closing Macy’s men’s store locations in Walnut Creek and San Francisco. Some, like JCPenney, have not disclosed which stores will go.
“The Bay Area has been the strongest retail sales area in the country,” said Helen Bulwik, a senior partner at Newport Board Group, a business consulting firm. “We would be among the last where you would see store closures unless someone has really overstored or has incredibly large locations where they have to downsize their footprint.”
While the Bay Area is a strong market, the scramble for retailers to right themselves financially means that closures will likely come to the Bay Area eventually, Bulwik said. “There is such a dramatic change occurring relative to how people are buying.”
That change includes a shift to buying online over brick-and-mortar shopping, as well as a trend in shoppers seeking more urban, mixed-use shopping districts over sprawling, suburban malls, Bulwik said.
Signet Jewelers, parent company of Kay Jewelers, Zales and Jared jewelry store chains, said it plans to close 165 to 170 stores in its current fiscal year. Most of those will be in malls, and the company plans to open up to 115 stores that are mostly in stand-alone, nonmall locations. The company said it was too early to say whether any Bay Area locations will close. There is a Kay Jewelers in most Bay Area malls, according to the company’s website.
Tech-savvy Bay Area residents have become particularly inclined to shop online instead of in stores. According to research about holiday shopping from Deloitte, the percentage of Bay Area shoppers who planned to make a purchase online was higher than the national average, with many people indicating they did not want to face crowds or wait in long lines last holiday season.
But other factors are impacting retail, including politics, said Garrick Brown, vice president of retail research at Cushman and Wakefield. While Wall Street loves deregulation and corporate tax cuts, as President Donald Trump has promised, it does not like unpredictability, which the president also offers. If actions on immigration slow down tourism, for example, that could impact Bay Area retail, which gets a big boost from tourism, even further.
“If we got into a trade war with Asia, which is a high risk, our local economy would be more negatively impacted, as that’s who is making our goods and buying our goods,” Brown said.
Malls themselves are bracing for the changes and adapting to changing consumer tastes by renovating and making changes to their tenant lineup. Many are finding nonretail uses for big-box store footprints left open by large retailers moving out.
Badstubner pointed to successful malls in the Bay Area — including Broadway Plaza in Walnut Creek, Stoneridge in Pleasanton, Stanford Shopping Center in Palo Alto, Valley Fair in San Jose and San Francisco’s Westfield Centre — as examples of malls that have put money into renovations. In addition to upgrading the amenities, many shopping centers are seeing plenty of interest from non-apparel tenants, including movie theaters, entertainment centers, gyms and others.
Indeed, John Parlet, who owns a chain of entertainment centers called John’s Incredible Pizza, said that while he used to have trouble getting noticed by mall operators, they are now calling him with interest in putting his entertainment centers in locations that formerly housed large mall retailers.
“The big malls that have done well are reinvesting in (themselves),” said Badstubner.
Article source: http://www.eastbaytimes.com/2017/03/14/as-trouble-looms-for-retailers-what-will-happen-to-bay-area-stores/
