Advance Auto Parts Is Closing 700 Stores - Now What Happens To Its Real Estate?
Unlike with other retailer bankruptcies, there does not appear to be a category of users ready to absorb a significant amount of the Advance Auto real estate
Last week Advance Auto Parts announced plans to close over 700 stores.
Although Advance Auto has not yet provided a list of locations or timing of the closures — it is anticipated that the vast majority will likely be West Coast stores (though it has been reported six Milwaukee-area stores that are expected to close in Q1 2025).
So what will be the likely future uses of the Advance Auto real estate — and how quickly will the stores be re-tenanted?
The good news is that many Advance Auto stores are modern, freestanding buildings that are generally between 7,000 - 8,000 square feet.
They typically have open floor plans, ample parking and even a grade level roll-up door — features that will allow them to be repurposed for many uses.
Additionally most Advance Auto Parts stores are located on high traffic roads with good access and visibility.
But the bad news is that — unlike with the Big Box store closures that resulted from the Toys R Us, Bed Bath & Beyond and Kmart bankruptcies — there is no major tenant or retail category set to quickly absorb a substantial amount of the Advance Auto real estate.
The Toys R Us bankruptcy also led to the closure of ~700 of its Big Box stores — but over 90% of this real estate was backfilled within three years.
And off-price retailers like Burlington Stores, TJ Maxx, Hobby Lobby and Ollie’s Bargain Outlet accounted for nearly 1/3 of the re-tenanted stores.
Similarly, the ~480 Bed Bath & Beyond stores that closed during that retailer’s April 2023 bankruptcy have also been aggressively pursued by off-price retailers.
Burlington alone acquired 64 of the Bed Bath store leases in a bankruptcy auction and has been entering to new leases for additional former Bed Bath sites.
For off-price retailers like TJ Maxx and Burlington, the stores vacated by Toys R Us and Bed Bath & Beyond have been a great fit both because they matched their desired real estate criteria and had a built-in customer base and sales history.
Similarly while over 3,000 former Kmart properties have been redeveloped and repurposed for a variety of uses, certain operators have specifically sought out this real estate.
Like U-Haul which found the large Kmart buildings and expansive parking lots ideal for its self-storage operation.
U-Haul has gone on to repurpose over 120 former Kmart sites for self-storage.
Other retailer categories have also aggressively pursued specific real estate to add to or upgrade their real estate.
Including dollar stores like Dollar Tree and Dollar General that have expanded into many former drugstore sites vacated by Walgreens, Rite Aid and CVS.
However there is no major tenant or retail category likely waiting in the wings to backfill the real estate that Advance Auto is set to vacate.
Competitors O’Reilly Auto Parts and AutoZone already overlap with Advance Auto in most markets and while each will be happy to absorb the lost sales that had been generated by the shuttered stores, they are not likely to pursue the real estate.
Instead "one-off" users — like independent retailers, office users and others — are likely to fill the majority of the stores vacated by Advance Auto Parts.
But the lack of a concentrated user or category of retail tenants aggressively pursuing the former Advance Auto stores will probably result in a long process to re-tenant or repurpose the real estate.