U.S. store closings have accelerated, surpassing any full-year total since the height of the pandemic in 2020. But there will be demand for that vacant retail space, according to industry analysts.

As of late last week, U.S. retailers had announced 6,481 store closings for this year, according to Coresight Research, already eclipsing the 5,553 closings it tracked for the whole of calendar 2023 and higher than any full-year total since 2020, when COVID-19 broke out. Similarly, in its most recent U.S. retail report, CoStar cited an "uptick in store closures, which have risen to their highest level since 2020."

This year, the U.S. retail industry has been bedeviled by a series of bankruptcy filings — from companies such as 99 Cents Only and Conn's HomePlus — that led to entire chains being liquidated. Others, such as Family Dollar, Big Lots and drugstore giants Walgreens Boots Alliance, CVS Health and Rite Aid are shuttering swathes of locations. And after Coresight released its data last week, Franchise Group filed for Chapter 11 and announced it was closing down American Freight, a 300-plus store furniture chain.

But with the U.S. retail vacancy rate at roughly just 4%, expanding chains will be looking to closed stores for new locations, Walter Wahlfeldt, senior managing director of retail for the brokerage JLL, told CoStar News. He immediately took action when he learned about the American Freight closings this week.

"The first thing we did is we got the list of stores and sent it to every office of JLL's in the country with retail [brokers] because ... there's no space available," he said.

This year, there has also been a series of restaurant bankruptcy filings, most recently by Texas-based TGI Fridays, and closings of brick-and-mortar eateries by those operators. Coresight doesn't track restaurants as part of its data.

John Mercer, Coresight's head of global research, told CoStar News that domestic retail woes were due to a "confluence" of factors, with "a lot of it happening at once." The issues stem in large part from what happened during the COVID outbreak and its aftermath's impact on the macroeconomy, when inflation hit record highs and Americans spent all their pandemic stimulus payments.

Of course, some retailers are opening stores, helping to offset closings. But year to date, retailers have announced 5,363 planned store openings, outpaced by the 6,481 store closings, a trend that started in August. According to Coresight, the closings through October have already surpassed those for all of 2023, which were 5,553; 2022, at 3,819; and 2021, with 5,228 closings. But both 2020 and 2019 posted more closings than this year so far. There were 9,698 store closings in 2020 and even more in 2019, 9,822, according to Coresight.

Year to date in 2024, retailers have announced 6.3% more openings and 59.7% more closings when compared to the year-ago period, according to Coresight. As of Oct. 25, the analytics firm said it had tracked 42 retail bankruptcies compared to 25 in all of 2023.

The retail industry has faced "twin pressures," according to Mercer. Companies "that hold a fair amount of debt ... got the pressure of [rising] interest rates," he said.

The other pressure is on the cost side for retailers, with their labor costs going up along with inflation increasing their other expenses and putting a damper on consumer spending, according to Mercer.

Some struggling retailers were able to obtain "cheap money," loans at low interest rates, in the years after the pandemic's peak, Wahlfeldt said. That ended when interest rates rose, he said, as did the spike in consumer spending by homebound Americans during pandemic lockdowns. For ailing retailers, the cost of restructuring debt rose.

"So I think it's this sort of weird combination of inflation and interest rates and competition that has really driven so many of these retailers to finally have to bite the bullet and start closing stores, which they were able to dodge ... for a couple years," Wahlfeldt said.

Like Wahlfeldt, several brokers and analysts said there will be demand for the vacated retail space. When a retailer such as Big Lots shrinks its real estate, "there are companies ready to pounce there" and lease it, according to Mercer.

"Conditions within U.S. retail space markets remain historically tight heading into the final months of 2024," the CoStar report said. While store closings weigh on the current level of demand, "they also provide much-needed supply for those tenants looking to expand."

The increased demand for retail space is being driven by tenants in the food services, grocery, fitness, entertainment, and healthcare sectors, according to CoStar.

"Market participants are reporting exceptionally strong backfill demand for spaces as they go dark, with some spaces able to secure rent increases of 40% or more," CoStar said. "In addition, over half of the leases signed in the third quarter were for spaces that became available within the past six months, while nearly a third were for spaces that became available within the past three months."

The closed-store sites will get leased because quality spaces are still in demand in all parts of the United States, "but it will take a little longer for the absorption to take place," Chuck Lanyard, president of the retail brokerage Goldstein Group, said in an email.

"The 'new kids on the block,' those new concept retailers, will lease up the prime spaces," he said. "Even some of the big boxes will be leased."

Former Bed Bath & Beyond and Big Lots locations are being quickly filled by tenants such as Michaels, HomeSense, Amazon Fresh, and Sprouts Farmers Market, according to Lanyard.

"Where we expect spaces to sit empty for much longer times will be those rural big boxes or spaces that don’t have strong demographics," he said. "As an old timer put it best to me, when it comes to leasing, 'Sooner or later, everything gets leased.'”