Barnes & Noble Is Adding New Stores: Could Former Drugstore Real Estate Be Its Next Re-Tenanting Opportunity?
Former Rite Aid, CVS and Walgreens stores fit the size, location and building criteria that Barnes & Noble has been using to open new stores
Over the last decade and half, Barnes & Noble was far more likely to close a store than open a new one.
In fact, during the the fifteen year period between 2008-2023, Barnes & Noble closed over 120 stores.
By the end of last year the Company operated just over 600 bookstores, a significant decline from its peak of 726 stores in 2008.
But Barnes & Noble has returned to store growth — in a big way.
Barnes & Noble opened 30 new stores in 2023 and and is opening 50 more in 2024.
While new Barnes & Noble stores are still likely to include in-store cafes and cozy sitting areas common to existing locations, each new store is customized by a local bookseller team that is in charge of store layout, design, inventory and pricing.
New stores are expected to average just 14,000 square feet, or roughly 1/2 the size of the chain’s previous Big Box prototype.
But one thing that all of the new Barnes & Noble bookstores will have in common?
They will be developed via adaptive reuse of existing buildings or the re-tenanting of vacant “2nd generation” retail space.
So as Barnes & Noble searches for sites, what type of available real estate features:
~10,000-15,000 square foot building
A “neighborhood” location close to customers with good access and visibility
Room to include a cafe (and maybe even a drive-thru)
An open, column-free floor plan for layout and design flexibility
One category of real estate fits this criteria and is available in increasing supply:
Former drugstores.
The Right Size And Location For New Bookstores
In 2019 Barnes & Noble opened one of its first 14,000 square foot “small format” stores in the dense and affluent Detroit suburb of Rochester Hills, Michigan.
It was Barnes & Noble’s first new Michigan bookstore opening in 13 years.
The 14,000 square foot bookstore sports a wide open floor plan with low profile bookshelves, a children’s book and story area and even a Starbucks-branded cafe.
Despite its “smaller” format, the store still features over 30,000 book titles.
But while the Rochester Hills store is located in a shopping center, its size, layout and location resemble the hundreds of freestanding drugstores vacated in recent years.
Room For An Enhanced In-Store Cafe — And Even A Drive-Thru
Future Barnes & Noble bookstores may also place a larger emphasis on in-store cafes.
Barnes & Noble has operated cafes in its bookstores for more than 30 years.
In 1993 the Company entered into a licensing arrangement with Starbucks that permits it to sell certain Starbucks products and display the Starbucks logo.
But Barnes & Noble may benefit by outsourcing its cafe operation to Starbucks (or perhaps another coffee shop or food service chain).
After all Barnes & Noble has already tried its hand at enhanced food and drink offerings in several of its recent concept stores.
In 2017 Barnes & Noble opened five stores that include “Barnes and Noble Kitchens.”
These enhanced foodservice areas were more than twice the size of its other in-store cafes and also featured beer and wine sales, waitstaff and a full menu.
Barnes & Noble has revealed little information about the performance of its stores with the enhanced Barnes & Noble Kitchen format.
But it appears that the majority of its new smaller format stores are not likely to include this level of food and drink offering.
It stands to reason that Barnes & Noble may have more success by outsourcing its complete in-store cafe operations to either Starbucks or another coffee shop chain.
For instance, Barnes & Noble could sublease ~1,500 square feet of its new store premises to Starbucks (or another coffee chain) for it to operate a full service cafe.
This arrangement could provide consistent rental income to Barnes & Noble as well as drive customer traffic to the coffee chain during afternoon and evening dayparts.
Additionally most former drugstore buildings offer another interesting feature for a coffee chain partner — drive-thru lanes and a pick up window.
Other Bookstores May Also Find Opportunity in Former Drugstores
Of course Barnes & Noble is not the only book retailer that is adding new stores or backfilling vacant 2nd-generation retail spaces.
Another expanding bookseller is Goodwill Industries.
The nonprofit agency operates over 4,000 Goodwill retail stores in the U.S.
While many sell clothes, housewares and toys, some Goodwill stores have other formats — including dozens of Goodwill Bookstores
Goodwill Bookstores operate throughout the country — often in spaces that were once occupied by other retailers.
Such as the Goodwill Bookstore that opened last year in Temperance, Michigan.
It is an adaptive reuse of a ~7,000 square foot former Family Video store.
With wide aisles, low profile shelving, lounges areas —and the use of 2nd generation retail space — Goodwill appears to have emulated the Barnes & Noble store format.
If Barnes & Noble — and other bookstore operators — now have the right formula for new store size, design and location, more growth could be in the cards.
After all, despite the fact that over 70% of books are sold online or in an electronic format, there are still over 10,000 bookstores in the U.S.
And sales at U.S. bookstores increased in 2021 and 2022 before holding steady in 2023.
So if Barnes & Noble fails to pursue former drugstore real estate, the door may be open for other bookstore operators to pursue this opportunity instead.