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The last six months have brought news of a handful of bankruptcies in the retail space. Big Lots, Joann Inc, Party City and, most recently, Forever 21. This has led to the shuttering of a lot of storefronts.

While bankruptcies are more or less bad for the market, one retail broker says that in a market constrained by high construction costs, high interest rates and increasingly low vacancy rates, storefront closings for junior box storefronts might have some retailers “licking their chops.”

According to a Colliers report on the Minneapolis retail market, it has a 5.5% vacancy rate, with suburban properties at a lower 4.5%. This is down from last year and is forecasted to continue to drop. JLL Senior Director Matt Hazelton said market fundamentals remain strong but with little meaningful development on the horizon, rents are expected to increase too. Closures on junior box stores like Joann or Party City are a potential slight reprieve from rent hikes.

“I think Joann’s box sizes are maybe just a touch big compared to the average size of a PetSmart, Petco, TJ Maxx, but that being said, there’s not a lot of vacancies for those types of tenants right now, they’re hard to find.” Hazelton said. “We’ve heard a number of examples where people have three to six letters of intent on a space that’s going to be coming back to market.”

Hazelton said that for junior box retailers, new construction sites aren’t realistic.

“To go do new construction, you need to pay probably 50% to 100% more in rent to build your right-size store, and I think a lot of them are operating on smaller margins than that, so it’s just not realistic right now.”

Lisa Christianson, a senior vice president at Colliers said that some landlords might be excited to see a new tenant opportunity when it comes to Joann’s locations specifically. Landlords will want someone with strong credit, after Joann spent years “teetering” toward closure.

“They’re going to have to have decent credit, especially after the landlords are going to have to unwind and get control of their space back, so they’re going to want to make sure the tenant has some significant credit worthiness,” she said. “It’s going to be either a national or regional player, they’re not going to be startups.”

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