Retail real estate in the U.S. is undergoing a seismic shift, with store closures rising by 70% in 2024, reshaping markets across the country. For real estate developers and investors, these changes bring both challenges and opportunities. While brick-and-mortar struggles in some sectors, the evolving retail landscape presents strategic openings for those ready to adapt.

The Numbers Behind the Shift

By November 2024, 7,100 store closures had been announced, marking a 69% increase from the previous year, according to CoreSight Research. Key players driving this trend include:

• Family Dollar: Leading with 677 closures due to mounting losses from its $8 billion acquisition by Dollar Tree.

• CVS Health: Following closely with 586 closures, driven by declining sales and rising occupancy costs.

The situation is compounded by a surge in retail bankruptcies, with 45 filings in 2024—nearly double the 25 recorded in 2023. These trends underscore the economic pressures and shifting consumer demands affecting traditional retail.

Market Focus: NYC’s Retail Challenges

New York City’s retail market continues to contract, recording a 1.3% net decline in 2024, the fifth decline in seven years, per the Center for an Urban Future. Staten Island was hit hardest, with a 1.8% decline. Notable closures included:

• Telecom brands: Metro by T-Mobile led the pack.

• Pharmacies: Duane Reade faced a significant pullback.

• Food chains: Subway closed multiple locations across the city.

For developers and investors targeting urban retail markets, this shift highlights the need for agility and creative repositioning of vacant spaces.

Pharmacies and Dollar Stores: A Case Study in Struggles

The challenges facing pharmacy giants and discount retailers illustrate the complexities of today’s retail environment:

• Pharmacies: CVS, Rite Aid, and Walgreens announced a combined 1,253 closures, as rising costs and declining foot traffic took a toll. CVS shares have plummeted from pandemic highs of $100 to $45, reflecting the sector’s struggles.

• Dollar Stores: Family Dollar’s financial woes, including a $1.7 billion loss in 2024, raise questions about the viability of Dollar Tree’s acquisition strategy. Plans to shutter 1,000 stores highlight the challenges of scaling in an inflationary economy.

What This Means for Developers and Investors

Despite the closures, the retail real estate market isn’t all doom and gloom. Vacancy rates remain near historic lows, pushing asking rents higher in many markets. As CBRE notes, institutional capital is expected to flow back into retail, particularly as opportunities emerge in:

• Redevelopment: Vacant big-box stores and struggling strip malls can be reimagined as mixed-use developments or last-mile logistics hubs.

• Experience-Driven Retail: Tenants offering unique customer experiences are in demand, creating opportunities for adaptive reuse of older retail spaces.

• Pharma and Discount Store Repositioning: Developers can target these vacancies to attract new tenants in underserved markets.

A Look Ahead to 2025

As retail consolidates, the landscape will continue to shift, offering opportunities for those who can think strategically. Here are key considerations for navigating this transition:

1. Assess Market Potential: Focus on areas where demand remains strong, such as suburban growth markets or neighborhoods underserved by retail.

2. Reposition Struggling Assets: Explore adaptive reuse projects that can transform vacant spaces into vibrant, revenue-generating properties.

3. Anticipate Tenant Needs: Tenants with strong e-commerce integrations or unique experiential models are thriving in today’s environment.

4. Monitor Institutional Capital: The return of big capital to retail real estate signals potential opportunities for developers and investors to align with these trends.

Let’s Discuss Your Next Move

As the retail market evolves, staying ahead requires a proactive approach. Whether you’re looking to reposition assets, explore redevelopment opportunities, or strategize for 2025, let’s connect and build a plan that fits your goals.

📧 daniel@kaufmanredev.com

🌐 http://www.danielkaufman.info

The retail landscape is changing—let’s turn these challenges into opportunities.