(Bloomberg) -- The empty site of a former Toys “R” Us in Queens, New York, has risen from the dead—at least temporarily.
When Toys “R” Us liquidated in 2018, its store closures dumped millions of square feet of real estate onto the market. It helped drive the biggest quarterly decline in U.S. retail occupancy since 2009, according to real estate researcher Reis Inc, and the national vacancy rate ticked up to 10.2%, the highest since 2014. That’s mostly held steady, falling slightly to 10.1% in the second quarter.
New York didn't escape the effects. This Toys “R” Us in Flushing, Queens, closed in 2018 and it has been empty ever since. At over 30,000 square feet, the space isn’t easy to fill with new tenants.
Elsewhere in New York, retail tenants in even the busiest shopping areas have had to close shop due to rising rents. The brokerage Cushman & Wakefield reported this year that in a survey of Madison Avenue's storefronts, nearly 30% of shops were available for rent.
The new reality is forcing property owners to resort to short-term leases for pop-up stores and seasonal events—a big change from past years when landlords would only accept multiyear deals. Shorter-term leases give some web-based companies, like Amazon.com Inc. and Wayfair Inc., a chance to test the brick-and-mortar waters without a big commitment.
The mood is more sanguine in certain corners of the market. Retailers like Walmart Inc. and Target Corp. raised their earnings outlooks in their most recent quarterly reports, while profits at Home Depot Inc. and Lowe’s Cos. affirmed that consumer sentiment was strong.
But for specialty and apparel retailers, earnings have shown steady declines. This year, their holiday performance will go a long way toward determining which of these companies go on living—and which are left to the zombies.
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