Expert insights on the future of the chain’s 300-plus locations.
By Scott Baltic | April 8, 2024 | As published by Commercial Property Executive
The announcement last Friday that 99 Cents Only Stores LLC was going out of business has immediately put into play the company’s 44 owned and 333 leased locations in Arizona, California, Nevada and Texas.
In this era of retail turmoil, the questions for the real estate industry are at least fairly predictable: How quickly are those spaces likely to be acquired? By whom? And how is the dollar store sector doing in a time of booming job growth coupled with substantial inflation anxiety?
Overall, retail sector observers are moderately optimistic that these 300-plus locations will be in demand.
“There is a strong likelihood that the spaces could be backfilled quickly. The average size of the 99 Cents Only stores is around 21,000 square feet, which is a good junior anchor box size that many retailers looking to expand in the U.S. seek,” Brandon Isner, CBRE’s Americas head of retail research, told Commercial Property Executive.
Of course, it’s more complicated than that, as Isner acknowledges: “Location is everything. Many retailers use focused location analytics to determine where their expansion strategies should be aimed. Often, they’ll seek out the best submarkets and trade areas first, so the 99 Cent Only stores in growing markets will be the first to be backfilled.”
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Chris Premac, senior associate of retail brokerage for Coreland Cos., Tustin, Calif., elaborated on some further nuances: “Like many real estate portfolios, 99 Cents Only has high-end and low-end locations. Some key vacancies will provide landlords with a strong opportunity to re-lease the space and upgrade rents and tenancies,” he told CPE.
“Other, less-desirable locations will create more of a problem for owners,” he continued, “as they might sit vacant or go backwards in rent. Unfortunately, we might be dealing with more of the latter, as 99 Cents Only has been working to strategically re-tenant its best real estate for several months now.”
Likely Suitors
As to which types of chain retailers might be in the market for 99 Cents Only locations, Isner stated: “Discount retailers have been known to backfill spaces within that range. Additionally, smaller-format grocery stores have backfilled a few boxes around that size, so they could potentially be in the mix.”
In addition, he remarked, some department stores have been closing underperforming full-size locations and looking for smaller, off-mall locations for expansion in 2024 and beyond. Isner adds to this list of interested parties other off-price retailers and discount department stores and certain grocery stores, this last type “especially in spaces where they don’t already have a presence.”
Wilson predicts that smaller-format grocery, soft goods, discount, food, drive-thru and retailers will be interested in these sites. Premac reports that Coreland has been working with “several expanding users targeting Southern California locations in the 15,000- to 20,000-square-foot range. Aldi, Grocery Outlet, Trader Joe’s and Ace Hardware, to name a few, all pursued the similarly sized Big Lots portfolio that was on the market last year.”
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