What’s Going to Happen to All Those “Toys R Us” Stores?

What’s Going to Happen to All Those “Toys R Us” Stores?

The announcement of Toys R Us stores closing across the nation was a sad but predictable outcome as popularity for online shopping and electronic games continues to grow. But with the sudden vacancy of over 700 Toys R Us buildings, many are wondering what’s going to happen to those prime storefront properties.

For most of the real estate, the answer is they’ll probably sit empty until the end of summer. However, come the holidays’ shopping season, many of them could be temporarily occupied under short-term leases, while some are expected to have permanent tenants by the end of the year.

Due to Toys R Us’ prominent success for a string of years, the chain managed to secure prime storefront locations in cities all along the Northeast, Florida, and California, which now sit as the perfect opportunity for businesses looking to increase store locations or upgrade to a higher traffic area. Similarly, much of those locations lie in areas with traditionally high real estate costs, adding yet another incentive for interested businesses.

Party City marks one of the first few chains to swoop in, announcing plans to occupy 50 empty Toys R Us buildings this fall to sell their Halloween and Christmas lines under a short-term lease. Burlington, as well, has already agreed to buy 2 of Toys R Us’ locations, on top of the planned 30 relocations, and 60 new store openings.

Other major retailers have also announced intentions to expand, though it’s unclear whether those new locations will be in previous Toys R Us locations.

TJX – the parent company of HomeGoods, TJ Maxx, and Marshalls – plans to open 238 new stores by the end of 2018, while Ross has announced the addition of 100 more storefronts to its name.

The most prolific expansion, however, can be seen in off-price retailers.

For Dollar General, 900 stores will soon be added and another 100 relocated, while Dollar Tree and Family Dollar are in the process of opening another 650 stores by the end of 2018. Unless a landlord is willing to subdivide the property, however, those new locations most likely won’t be in empty Toys R Us stores, as the off-price retailers traditionally require a smaller space.

While online shopping had been a major influencer in the closure of over 7000 brick-and-mortar stores last year – nearly triple the closures we saw in 2016 – the overall health of the economy, low rate in unemployment, and rising growth amongst small businesses contributed to a 50% rise in new store announcements, as 3,400 businesses rose up to fill those empty buildings.

As of 2018, there have been 4,100 store closures and 1,900 new opening announcements, so although the future may seem bleak for brick-and-mortar retailers, in reality, the vacancy rate is still low. We may be saying goodbye to Toys R Us, but the end of one business is merely the start of another.

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