The Retail Tenants Most Likely to Expand

Multiple retailers filed for bankruptcy and/or went out of business in 2024. Big Lots, LL Flooring (Lumber Liquidators), Walgreens and Party City, to name a few, are in the process of shuttering locations. However, according to Northmarq, the pending vacant space provides opportunities for other retailers’ expansion plans.

In its recently released Q4 2024 report, “The Top 100: Tenant Expansion Trends,”  Northmarq analysts explain that estimated openings and expansions will exceed the anticipated number of closings over the next few years. To that end, Northmarq released a list of 100 tenants forecast to expand, including:

• Automotive and convenience: 7-Eleven, O’Reilly Auto Parts, AutoZone

• Discount and dollar stores: Target, Dollar Tree/Family Dollar, Five Below

• Grocery: Sprouts, Whole Foods Market, Kroger

• Retail Banking: Wells Fargo, PNC Bank, Bank of America

• Restaurants: Wendy’s (QSR), Panera Bread (casual), McDonald’s (QSR)

“Tenants are selected for the Top 100 list based on a combination of factors,” Northmarq Senior Director, Content & Marketing Research Lanie Beck told Connect CRE. “These include, but aren’t limited to, expansion rate, frequency of investment sales transactions and brand recognition.”

Convenience Reigns Supreme

Quick-service restaurants (think Jack in the Box and Slim Chickens) and convenience stores (including Wawa and Sheetz) are topping the expansion list. “Consumers are increasingly prioritizing convenience, which makes QSRs and C-stores quite popular,” Beck said.

She added that QSR and C-store tenants are also becoming more sophisticated. New fast-food concepts continue to emerge. “C-stores also have become more sophisticated, with many now offering fresh food choices in a clean and modern atmosphere,” she said.

What Drives the Discounters

The report pointed out that discount retailers, including Five Below and Ross Dress For Less, are working on “significant growth plans, as consumers remain cost-conscious.”  Meanwhile, retailers that have maintained their footprints over the past few years—including Walmart and Lowe’s—are also focused on growth.

Beck explained that Walmart’s expansion plans are based, in part, on competitive forces. “With increased competition from Amazon, Walmart views having physical stores as a competitive advantage since next-day delivery still isn’t fast enough for some items or some customers,” she said.

Meanwhile, Lowe’s is focused on fast-growing markets and wants to target professional customers and do-it-yourselfers. Beck said Lowe’s is investing in its online capacity while expanding physical stores to reach both audiences. “Rural markets have also been identified as a way for the brand to capture more market share,” she noted.

One Retailer Closes, Another Opens

The report indicated that shuttered storefronts or big boxes could mean opportunities for retailers in expansion mode. “Tenant expansion information allows real estate developers to scale their operations based on anticipated growth from the retailers they work with,” Beck said. Such information also benefits investors, who can use it to attract tenants or understand a brand’s risk. “We’re seeing brands evolve in real-time as consumer preferences drive change across a variety of industries,” Beck pointed out.

Ultimately, the consumer dictates which retailer will stay open and operational and which will close. “Forums are filled with loyal customers begging for In-N-Out Burger to expand to the East Coast or for Trader Joe’s to finally choose their neighborhood for the next store,” Beck said. “The general public is always interested to learn more about a new retailer coming to their town.”