Retail’s Real Estate Glut is Growing

That is the headline in a Business Week article this week.

Last year 105 million square feet of retail space was announced for closure and this year so far the total is 77 million square feet in just the first three months.

Readers are familiar with some of the names of famous stores–Toys R Us, Sam’s Club, j Crew and a host of others including some Sears and Macys stores locally

We see it in the region as well with the closure of the Vallco Mall and repurposing under way to include housing and a smaller more diversified retail mix,. The same is true in the Hilltop Mall in Richmond.

Business week reports that the U.S has 24 square feet of retail space per person, several times more than in most developing countries.

Stanford Shopping Center seems to be doing well based on strong tourist sales but is also changing its mix as the new Tesla store indicates.

And when I walk downtown I see space that has stayed vacant for a long time and to my eye more vacancies than since the strong job growth began.

If it were just high rents, that would not explain the widespread store closings in areas where rents are not high and the downsizing and move to online of chains here and across the country.

If it were just parking availability that would not explain empty mall space around the country where parking is ample including Vallco and Hilltop.

A long term trend seems to be emerging where online sales growth far outpaces store sales growth though it is still not a large share of retail–but compound growth over 10% a year will move the online % up steadily.

And with store closings and excess space, owners may seek non retail uses including housing that provide a better return.

It will be interesting to see how this plays out in Palo Alto and surrounding communities.