Impact of Retail Store Closures on Real Estate

As more and more consumers shop online, the need for large malls has overall decreased. Other reasons for less consumer mall traffic include inflation and changing consumer preferences. Recently, the department store Macy’s has announced that it will close approximately 150 stores throughout the United States by 2027. This has a huge impact on the overall real estate market, as Macy’s stores were mall anchors, having between 200,000 and 225,000 square feet.  Whether it is a big box anchor store such as Macy’s, two major questions arise: What will happen to the space and how does these substantial closures change the ever-evolving real estate market?

What happens to the commercial real estate space once retail stores close?

Picture Courtesy Amazon

Typically, the space evolves into a multi-purpose real estate venue where apartment complexes, restaurants, and recreational activities such as laser tag, rock climbing, and pickle ball emerge from the vacant space. The commercial space may turn into warehouses, athletic facilities, and Amazon fulfilment centers.

How does this affect residential real estate?

The evolving commercial real estate space affects residential real estate depending upon the use of the new space and the effects of the closure of the commercial tenant. For instance, the loss of employment of those who were employed at the closing retail space has a ripple effect on the surrounding residential market. Those employees who are unable to find employment may be forced to sell their homes at lower prices than they would not have preferred. More of those employees may turn to renting or may prolong their ability to purchase a residential home until such time as they are able to find employment.

On the other hand, with more mixed-use commercial space, residential communities are born where groceries, recreational activities, work, and living are incorporated into a geographically smaller area. The concept of work, play, and live are included in one destination.

SOUTHPLACE City Center Picture Courtesy RSP Architects 

However, should the ultimate use of the vacant commercial space become one large fulfilment center, then more residential housing will be required to accommodate the number of employees needed to work at the center. With more people working in an area, there is more demand for more groceries, entertainment and recreational areas, and schools which, in turn, will create more demand for attainable housing.

What does this all mean?

Retail real estate is dependent upon residential real estate for spending, traffic, and work. Yet, at the same time, people need to find housing near these commercial spaces in order to work and shop. Depending upon how vacant commercial retail is changed, there will be an effect on the residential real estate market as to where people will live.

Should you have any questions or need assistance with a residential real estate purchase or sale, our title company, Weston Title & Escrow, Inc. is able to help you and can be reached at 954-384-6168. Should you have any legal questions about a potential purchase or sale or another legal matter, our team at Oppenheim Law can be reached at 954-384-6114.

Roy Oppenheim

From the Trenches