Over the next five years, UBS anticipates that approximately 50,000 stores will close in the United States following the pandemic pause.

• UBS analysts now project fewer closures than initially anticipated a year ago, despite their expectation of continued pain.
• The number of retail stores projected to close in the US over the next five years has been revised by UBS from 80,000 to between 40,000 to 50,000.

In 2020, a pandemic caused a surge in store closures and dozens of retailers filed for bankruptcy, resulting in empty shopping malls and vacancies on major streets in cities like New York.

In 2021, retailers reported net store openings, indicating a sudden reversal from years of net declines. Companies took advantage of cheap rents and an eagerness among Americans to get out and shop again.

UBS analysts now project fewer closures than initially anticipated a year ago, despite their expectation of continued pain.

Physical stores have played a crucial role in retailers' businesses during the Covid pandemic, and their future looks promising, according to UBS retail analyst Michael Lasser, who stated in a new report on Wednesday that retail sales growth has remained strong, in part due to rising inflation.

UBS has revised its projection for retail store closures in the US over the next five years, now estimating between 40,000 to 50,000 closures, down from the previously forecasted 80,000. This represents about 4.6% to 5.1% of the 880,000 total retail stores that UBS tracks nationwide, excluding gas stations.

According to Lasser's report, U.S. retail sales are expected to increase by 4% annually, and e-commerce sales will account for 25% of total retail sales by 2026, up from 18% in 2021.

By 2026, UBS predicts that about 23,500 closures will occur among clothing and accessories retailers, consumer electronics businesses, and home furnishing chains.

Neighborhood strip centers are less likely to close than traditional shopping malls, according to the firm. This is because shopper traffic to malls, which are often anchored by department store chains, has decreased in recent years as consumers prefer quick trips to stores closer to their homes.

General merchandise retailers, such as Walmart and Target, and auto parts businesses are predicted to have net openings in the future years.

As per Lasser and his team, the U.S. has approximately 58 square feet of shopping center space per household in 2021, which is lower than the 62 square feet in 2010 but higher than the 55 square feet in 2000 and 49 square feet in 1990.

As consumers increasingly spend online, it's logical that the number of people shopping in-store will decrease, Lasser stated.

Despite announcing fewer store closures than openings, U.S. retailers have outpaced their plans to open new locations this year. According to Coresight Research, retailers have announced 1,385 store closures and 3,694 openings as of April 1.

The growth of the store is being fueled by dollar chains and discount stores, as well as digitally native companies that started online but are now expanding their customer base through physical stores. Examples include Warby Parker, Glossier, Outdoor Voices, and Everlane.

Despite a continued acceleration in e-commerce, the number of shopping centers in the U.S. reached a peak of 115,000 last year, up from 90,000 in 2000, according to UBS, which releases these closely followed, deep-dive store closure reports every few years.