The Toys R Us bankruptcy has left the commercial real estate market with 800 empty locations. The question is: What is going to happen to the available space? Who will move in and how quickly will it happen?
I got some answers to those questions in a The Real Deal article by Francisco Alvarado entitled "Cleaning Up After Toys R Us". The Real Deal is a magazine that covers the commercial real estate industry and this particular article puts the question this way: "The failure of the largest U.S. toy chain — the third-biggest retailer ever to file bankruptcy — puts 800 locations up for grabs and presents the retailer, as well as brokers, landlords and lenders, with a plethora of options, though not all of them are attractive."
The article first assays the overall condition of the real estate market as one in which, due to a number of bankruptcies and downsizings (Sports Authority, HHGregg for just two examples) is suffering from numerous empty flagship locations. The article notes that in Broward County, Florida alone there are currently 16 empty big box locations.
Complicating the Toys R Us closings is that there a very large number of property owners involved so there is no way to do auction off a large number of locations at one time. It looks like they will have to move in very small batches.
All of this means that it could take a while for some of the properties to lease if at all. In some cases they may need to be turned into sites for alternative purposes like play centers or schools.
One thing seems for sure, rental costs for retailers are going to go down and as digital retailing continues its growth we can look for even more empty locations in the future.