Store Closures Rampant? Maybe. Random? Definitely Not.

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The slate of recent store closures has been well documented. And though the number of locations going dark may paint a picture of a widespread “apocalypse,” recent reports show it’s primarily the bottom that’s dropping out of retail while the top continues to thrive.

Store closures to date represent 70 million square feet of space, most of which is concentrated in malls, shopping centers and buildings with low location quality scores (LQS). CoStar Realty Information analyzed Kmart, J.C. Penney and Sears, the retailers making up the bulk of the closures, to illustrate how retailers typically decide which doors to close. These three chains alone are shuttering stores amounting to an estimated 45 million square feet.

Using a scale of 1 to 100 to assess the LQS of each location that’s scheduled to close, CoStar found that 65 percent of closures had a rating that fell below 50, which is considered to be weak. Meanwhile, those with the best ratings (90 to 100) only represent 6 percent of the stores going dark.

While there is a vast difference between the average LQS of closing stores and those that will remain open for Kmart and J.C. Penney, that’s not the case for Sears. The average LQS for locations Sears is closing is 67, which is higher than the 64 score for those that will remain open. The difference is the reason for the closures, according to CoStar. “This reflects the fact that Sears often owns its locations and is closing some of its stronger locations in an attempt to raise cash,” the report said.

The chart shows the higher rate of closures among locations with lower scores.

store closures by location from CoStar Realty Information
Photo credit: CoStar Realty Information

In related research, CoStar listed the retailers that have the highest performing stores.

Few in retail would be surprised to learn that Apple stores ranked No. 1 in sales per square foot, averaging $5,546. The tech company is often cited among landlords as an ideal tenant due to its drawing power. And the commercial real estate intelligence firm expects Apple’s dominance to continue as consumers’ obsession with iEverything lives on.

[Read more about the most coveted tenants in malls today: Don’t Write That Mall Obit Yet]

Lululemon Athletic is the top apparel retailer, generating $1,560 per square foot. While that’s the best in its category, it falls short of leaders in other sectors like Tiffany for the jewelry market at $2,951, Murphy USA for gas stations at $3,721 and Reis & Ivy frozen yogurt kiosks for food at $3,970.

With the disparity between the top performers in other categories and the leading apparel retailer, it’s no wonder why retail shareholders have gotten increasingly antsy as they watch what they consider to be missed opportunities.

Take Hudson’s Bay Company, which owns key property in which its stores operate. Activist shareholder Land and Buildings Investment Management has been campaigning to get the company to either sell some of its banners or exit apparel retail altogether in favor of redeveloping its real estate into other businesses. In June the hedge fund asked the board to consider swapping out the flagship Saks Fifth Avenue location in New York City for a more profitable venture like an Apple store.

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