UBS expects 50,000 store closures in the U.S. over the next 5 years after pandemic pause

A shopper passes by a jewelry store that is going out of business in Brooklyn, New York, December 8, 2020.

A surge in store closings and retailers filing for bankruptcy in 2020 left shopping malls empty in major markets, including New York City.

Companies took the chance in 2020 to quickly slim down their store counts when consumers were holed up at home, as the aftermath was a temporary relief. The reversal of years of net declines was reported by retailers in 2021. Companies took advantage of cheap rents and Americans' eagerness to shop again.

The investment bank had originally projected that there would be many closures, but it is not as bad as it was.

In a new report, the bank said that brick-and-mortar shops have proven to serve a critical role for retailers during the Covid pandemic, and that retail sales growth has remained strong in part due to rising inflation. Michael Lasser, a retail analyst with the Swiss bank, said that this boded well for the future of physical stores.

The number of retail stores that will close in the United States over the next five years has been lowered. The firm tracks 880,000 retail stores nationwide, but excludes gas stations.

This estimate assumes that retail sales grow 4% annually, moving forward, and that e-commerce sales as a percentage of total retail sales grows to 25% by 2026, from 18% in 2021, Lasser said in the report.

The most closings will happen among clothing and accessories retailers, consumer electronics businesses and home furnishing chains.

The firm said that traditional shopping malls are at higher risk of closing. In recent years shoppers have been pressured to go to malls that are anchored by department store chains.

Target and Walmart are expected to report net openings in the years ahead.

Lasser and his team say that there is still 58 square feet of shopping center space per household in the U.S., as of 2021. It is above 55 square feet in 2000 and 49 square feet in 1990.

Lasser explained that it makes sense that the number would shrink as consumers shift more of their spending to the web.

Retailers' plans to open new locations are far out of line with their plans to close shops. As of April 1, there were 3,694 openings in the U.S., but just 1,385 store closings.

Dollar chains and discount stores like Dollar General and TJX are driving the store growth while a wave of digitally native companies that started on the internet are trying to acquire new customers in bricks and mortar. Some examples include Allbirds, Allbirds, and Allbirds.

The number of shopping centers in the U.S. reached a peak of 115,000 last year, up from 90,000 in 2000, despite a continued acceleration in e- commerce, according to a report from the Swiss bank.