Study Predicts 1 in 5 Department Stores Will Close by 2023

Department stores have been a staple of American life since the 19th century, but they’re in an unprecedented state of flux. A new study by Coresight Research anticipates that between 1,100 and 1,200 department stores will close by 2023, reducing the 2017 total of 5,900 by a fifth.

Some of these changes are already underway: The recent bankruptcy of Bon-Ton Stores will leave 200 locations vacant (some could find individual buyers, but liquidation sales and layoffs are already underway); Sears Holding Corp. has cut its brick-and-mortar footprint in half in the past five years, shuttering more than 200 Sears and Kmart stores in 2018 alone; and Macy’s is on track to reach the 100 planned closures it announced in 2016, cutting off underperforming locations in what seems like a successful bid to improve its financial health.

According to Coresight’s research, the closures mean that malls will see an average of one anchor store closure by 2023, although the effects are likely to be felt most in lower-traffic regional malls, particularly if they fail to find new tenants to appeal to the modern consumer, such as grocery stores, gyms, digital-first brands and pop-ups.

Malls will adapt to the changing landscape; however, it will take flexibility and collaboration between landlords, tenants and municipalities to work around challenges like zoning restrictions, use prohibitions within existing leases, and construction costs, analysts say.

“Compromise among the parties as to future uses and parking and suite configurations can lead to a once-again thriving center, but it takes broad recognition that the needs of replacement tenants is significantly different than previous users,” said Matthew Mason, a managing director at Conway MacKenzie who assists institutional clients, lenders and private investors with distressed real estate. “A move to a blended-use center is the key to future stability.”

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