Who’s Going to Move Into the Hundreds of Empty Toys ‘R’ Us Stores?
The collapse of Toys “R” Us Inc. is yet another blow for landlords, who now will have gaping holes of suburban retail space up for grabs. And few tenants would want them.
The debt-laden toy chain, with more than 700 stores across the U.S., became one of the largest victims of the retail decline when it announced on Thursday that it would go out of business after a failed rescue effort. The liquidation could dump millions of square feet of real estate onto a market that’s already bloated with vacancies from retailer bankruptcies and store closures, a trend that’s been escalating as shoppers increasingly turn to the internet.
An employee packs merchandise into boxes inside a Toys R Us store in New York on March 15.
Photographer: Christopher Lee/Bloomberg
“It’s really tough right now to find a solution for something that’s that big and with that many locations,” Jan Kniffen, a retail consultant and founder of J. Rogers Kniffen Worldwide Enterprises, said in an interview. “How many people need more stores right now? How many people need more square footage? Not very many.”
Toys “R” Us has stores in all types of shopping properties — from standalone locations to community strip centers to large regional malls. Many centers are in the hands of publicly traded real estate investment trusts that lease space to the chain and may struggle with declining values for the properties. Some stores are owned by Toys “R” Us itself.
How successful landlords will be in filling empty stores will depend on the quality of the properties and their locations, according to research by CoStar Group Inc. Toys “R” Us owns many of the stores in weaker areas, while GGP Inc., the second-biggest U.S.