The amount of retail space closing in 2018 is on pace to break record

Source: CoStar Group

In a recent report, Cowen & Co. said it estimates Gap, Macy’s, J.C. Penney and Signet Jewelers are among those that might need to close more stores than previously forecast.

“We believe stores are not going away but without a doubt, stores/malls will be redefined as customer acquisition points and off-mall locations will continue to be a platform for off-price and value retailers to expand their footprint,” Cowen analyst Oliver Chen said.

Those retailers on Moody’s distressed-level watch list, which have maturities looming and risk defaulting, include Sears Holdings, Guitar Center, J.Crew and David’s Bridal. Should any of these companies go bankrupt, it could mean even more vacant storefronts at malls and shopping centers.

Still, some property owners look at these closures with optimism, welcoming the opportunity to fill spaces with new tenants with more profitable businesses. In a recent case study on U.S. malls, CoStar Group found top-tier (or Class-A) mall owners were more likely than other landlords to release a space within one year of a department store anchor moving out.

“I think it gets harder and harder the more these big boxes come on the market,” Mulvee said, for owners to find replacements. The future often will include more mixed-use components: residential spaces, offices, entertainment venues or medical centers. CoStar has said 2018 should be a “peak year” for the amount of retail space closing, with companies edging toward healthier fleets of stores.

Read more: Here’s a map of some of the biggest stores closing in 2018

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