• Bed Bath & Beyond, which filed for bankruptcy, is expected to soon close hundreds of stores.
• That is likely to result in a land grab by retailers and other companies that are looking to expand.
• It could be a particularly good opportunity for low-price chains and dollar stores.

In strip malls across the country, Bed Bath & Beyond stores have "Closing Soon" signs.

For other retailers, those may as well be "For Rent" signs.

The home goods retailer, which filed for bankruptcy Sunday, won't only create opportunities for competitors to gain new customers and market share. Its shuttered stores will kick off a land grab for retailers hungry for additional space.

Bed Bath will join a list of other bankrupt companies, such as Kmart and Sears, that vacated spaces and made way for stores. Bed Bath has nearly 500 locations that could open up — between its 360 namesake stores and 120 Buy Buy Baby locations — for other companies to rent. It had already shuttered many spots, as it wound down 150 underperforming namesake storesand shut all 49 of its Harmon FaceValue beauty-chain locations.

The company's stores remain open and its website is still operating. Liquidation sales began this week.

Yet Bed Bath's coming closures are hitting at a good time, according to real estate firms and retail industry watchers. The retailer has locations in high-traffic suburban areas. Its stores are easily adaptable at their size — typically around 30,000 square feet, according to industry analysts. Off-mall shopping centers' vacancy rates are low and demand is high, especially as discounters grow and traditional mall players experiment with new concepts.

Former Bed Bath stores could turn into a variety of other retail spaces, said Deborah Weinswig, CEO of Coresight Research, a retail advisory group. They could become doctor offices for CVS or Walgreens, as the drugstore chains push into primary care, or turn into grocery locations for growing chains such as Aldi or Lidl, she said.

Some may be sliced into locations for multiple companies. Others may be backfilled by a single tenant.

Bed Bath's spaces are more move-in ready than Kmart and Sears locations because by and large they were better maintained, while the better-performing stores only "need a little light dusting," she said.

"In the past, I may have been a bit more concerned if we were to go through something like this, but I'm just not," Weinswig said. "I'm not worried at this point because of the fact you've had this tremendous change in terms of demand for physical spaces."

An appetite for space

Bed Bath & Beyond's stores will go on the market as the off-mall space is hot and shoppers are flocking back to stores.

Weaker retailers' locations thinned out during the fallout of the Great Recession and again during the Covid pandemic, said James Bohnaker, senior economist with Cushman & Wakefield. Now, a mix of stronger retailers are vying for space in similar strip centers, including dollar stores, off-price retailers, direct-to-consumer players like Warby Parker and Casper, and traditional mall retailers like Macy's.

Vacancy rates for shopping centers fell to 5.6% in the first quarter of this year, the lowest level since commercial real estate firm Cushman & Wakefield began tracking in 2007. Such locations, which often include a major grocer and businesses like gyms and restaurants, have gained popularity because of their convenience and proximity to growing communities, new subdivisions and wealthier shoppers.

Retail real estate had a banner year in 2022 in the U.S., as store openings outpaced closures for the first time since 2016, according to Coresight Research.

Major retailers opened roughly 2,500 net new stores in the U.S. in 2022, the firm found.

Industry watchers expect retailers to expand at a similar pace this year, even as interest rates rise and the economy gets choppier.

There are several factors driving the demand for retail space, according to Coresight's Weinswig: Retailers have more money after shoppers' pandemic-fueled spending spree. Companies see brick-and-mortar stores as both billboards for their brands and fulfillment centers for their e-commerce orders. Retailers also are adding technology to better understand customer behavior, as Google and Apple's privacy changes make it harder to track them online. And hybrid work schedules mean shoppers visit stores throughout the day.

Discounters and off-price players, such as Dollar General, Dollar Tree and TJX Companies are leading the way with big plans for expansion, according to Coresight. They could become potential tenants, depending on how the former Bed Bath spaces are sliced and diced.

Bed Bath's vacated boxes could also be ideal spots for gym chains such as LA Fitness, Crunch and Planet Fitness, as well as off-price banners like TJX-owned HomeGoods and Marshalls, said Matthew Harding, CEO of Levin Management. The New Jersey-based firm is a landlord and property manager with more than 100 properties in five states and Washington, D.C. Its properties include some former and current Bed Bath locations.

Even mall players may take a look. Foot Locker, for instance, closed an estimated 187 stores in the U.S. in 2022, more than any other retailer, according to Coresight. The footwear company's CEO Mary Dillon, however, has spoken about plans to open new locations in strip centers. Macy's has also opened stores beyond malls.

Think of it as retail's circle of life.

Kimco Realty, a real estate investment trust with 27 Bed Bath stores in its portfolio, said it already has single tenants teed up to fill most of those locations. Through a spokesperson, the company said it can't yet disclose names, but they include a mix of off-price, full-price, entertainment, grocery, furniture, and automotive or appliance stores.

At a strip mall in the Phoenix area, one of Kimco's former Bed Bath & Beyond locations recently reopened as a Burlington store.

In one shopping center in Edgewater, New Jersey, a HomeGoods (owned by T.J. Maxx-owner TJX Companies) is moving into a former Bed Bath & Beyond, according to Levin Management.

In a Bergen County location in the state, negotiations are underway about turning a two-story Bed Bath & Beyond into multiple properties, according to Rick Latella, an executive managing director in the retail valuation practice of Cushman & Wakefield.

He said the owner is close to a deal with off-price retailer, Ross Stores, for one floor. And on the other floor, possible tenants include REI, Petco and Barnes & Noble.