The electronics chain announced that it will close 1,100 stores. Who will fill all that space? Think burritos.
FORTUNE — Here’s some good news for consumers: A sandwich shop may soon replace the RadioShack where you bought a phone charger that one time.
On Tuesday, the electronics retailer announced plans to close up to 1,100 of its 5,100 stores as its same-store sales plunged 19% in the fourth quarter of last year.
If you’re thinking, “Who knew there were that many RadioShacks?” you’re not alone. By comparison, fast casual Mexican restaurant chain Chipotle cmg has 1,600 locations in total. Panera Bread pnra has about 1,800. Even Rite Aid RAD has fewer locations — 4,600 — than RadioShack nationwide.
As 20% of those RadioShack RSH locations are set to shutter, another exclamation might come to mind: “Man, that’s a lot of empty real estate.” Right you are. At a time when retailers are shrinking their brick-and-mortar footprints, the big question is, Who will fill all that space?
RadioShack told Fortune on Tuesday that it is not yet releasing its store closing list, though it said in a press release that it will decide which stores to eliminate based on “location, area demographics, lease life, and financial performance.”
It’s likely, then, that the closings will come in cities where RadioShack is getting the least sales bang for its real estate rental buck, says Naveen Jaggi, senior managing director of CBRE Retail Services.
RadioShack has standalone stores and shopping mall locations. Closing its mall stores is an easier prospect for the retailer since the mall owner has first dibs on the rights to space; RadioShack itself can’t sublet the space, says Jaggi.
Standalone stores are tougher to ditch, especially if there are several years left on RadioShack’s lease. In that case, it will be up to the electronics retailer to fill that space.
The national vacancy rate for retail real estate was 10.4% in the fourth quarter of 2013, according to Reis, which tracks commercial real estate data. The rate was down 30 basis points for all of 2013, which put it just 70 basis points shy of its historical peak of 11.1% in 2011. You’d think that that figure — along with news that Abercrombie & Fitch anf and Macy’s M are also whittling down their physical locations in favor of greater e-commerce efforts — would make it difficult for RadioShack to fill all that space.
But here’s where RadioShack may catch a break. Each of its locations is approximately 800 to 1,000 square feet, and in retail real estate, smaller space is easier to lease than big box locations — just think of the limited number of businesses that could fill those giant abandoned Circuit City spots. Plus, there are segments of retail that are relatively healthy: “Retail today is about food, fashion, furniture,” Jaggi says. “Those are three categories that are showing good growth.”
RadioShack’s store space is too small for a clothing or furniture shop. That leaves food, and a grocery store is obviously out of the question. Quick serve restaurants — an industry in which customer visits increased by 8% for the 12 months ending in November — present the best option. “And there are hundreds of concepts out there now for burger and taco places,” Jaggi says.
RadioShack’s decision to close 20% of its stores didn’t come as a shock; the Forth Worth, Texas-based retailer lost $400 million last year. “We’re surprised it’s taken this long,” says Greg Maloney, chief executive officer of the retail division at Jones Lang LaSalle, a financial and professional services firm that specializes in commercial real estate and investment management.
The reduction in stores will position RadioShack to better serve niches in particular markets, Maloney says. And the rest of us will now enjoy a taco where those stacks of batteries used to be.