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Bed Bath & Begone: Why Rivals Bid Big for Bankrupt Vendor’s Leases

Bed Bath & Beyond’s location liquidation comes at an auspicious time for retail as twin trends of rising consumer demand and anemic new construction intersect


Bed Bath & Beyond, the powerhouse big-box home goods retailer that put many of its early rivals out of business, stripped the bed of 109 of its leases, with Burlington Coat Factory set to take over the most, according to a post-auction bankruptcy court filing. 

A&G Real Estate Partners auctioned off 153 Bed Bath & Beyond and Buy Buy Baby leases — although only 109 received qualified bids — ranging from 18,000 to 92,000 square feet each, on June 26. Discount retailer Burlington came out on top, and paid the highest price of $12 million to take over 44 Bed Bath & Beyond leases.

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Other big winners include craft store Michaels, furniture retailer Havertys and bookseller Barnes & Noble, who collectively will be replacing 17 locations. Macy’s paid $1.2 million for a location in Winter Gardens, Fla.

And Bed Bath & Beyond’s failure is other retailers’ fortune, since not only did it operate hundreds of locations around the country at a time of low retail vacancy, but most of them were in heavily trafficked locations.

“Bed Bath was the prom queen for a while,” said Mike Matlat, a senior managing director of A&G Real Estate, which has run similar auctions for Tuesday Morning, Toys R Us, Sports Authority, Party City and David’s Bridal. “They have great locations, great rents, nice lease terms, and that’s very attractive to other retailers.”

Various landlords scored second to Burlington, winning 37 of the leases, giving them the opportunity to raise rents in a tight retail market.

Regardless of the results of the auction, any parties, including Bed Bath & Beyond have until July 11 to object to any of the lease sales, the court filing says. won a separate auction on June 21, bidding $21.5 million for Bed Bath & Beyond’s intellectual property, name and digital assets, according to Yahoo. The sale was approved by a judge June 27. Bed Bath & Beyond also secured a total of over $27 million from the lease auction, Matlat said.

Bed Bath & Beyond filed for bankruptcy in April following an unsteady few years of business. It failed to adapt to e-commerce and to keep up with changing shopping habits, created its own label of products that were not well received, and got hit hard by supply chain issues during the pandemic, Holly Etlin, chief restructuring officer and chief financial officer at Bed Bath & Beyond, said in the retailer’s declaration of bankruptcy. It didn’t help that it faced an enormous loss as the result of becoming a “meme stock” and had strained relationships with vendors due to stores closing. 

The retailer narrowly avoided bankruptcy earlier in the year after scoring $225 million from a public offering, but “in-store sales continued to decline — with fourth-quarter sales falling by almost $1 billion dollars year-over-year,” Etlin said in the declaration.  

While 400 Bed Bath & Beyond locations have already closed, the bankruptcy left 360 Bed Bath & Beyond and 120 Buy Buy Baby locations vacant. This translates to roughly 14.5 million square feet of available space, said Brandon Svec, national director of U.S. retail analytics for CoStar (CSGP) Group. 

“Tenants from a wide swath of industries in the market are looking for space, [so] most of these locations, if they haven’t already, are going to be backfilled very quickly,” Svec said. 

While Burlington took advantage of the auction, many other big-box retailers didn’t. However, there will be another auction for the remaining leases in July. But Chase Welles, a retail broker at the Shopping Center Group, disagreed with Svec and argued the companies that skipped the auction simply didn’t want those stores.

“Bed Bath & Beyond took good locations in strong markets, and most of the people who would be interested are already there,” he said. 

Welles predicts that many of those spaces bought back by landlords will be divided, changing use and shape, and will be reoccupied within the next few years. “It won’t happen overnight,” he said.

Still, there’s a lack of available retail space in some markets thanks to a decade of very little new construction, especially following the 2008 financial crisis, which led to a decline in retail while banks and developers incurred losses. Svec said much of the development post-crisis has been for pre-filled leases.

“We haven’t been building power centers — large community centers, big anchor boxes, junior anchor boxes — much at all in this country over the last decade,” he said. 

Current high material costs have also caused some to “put the brakes” on building additional centers, especially following years of developing various comparable spots with similar lineups of retailers, Matlat said. 

Over 150 million square feet of retail inventory across the country have been torn down in the past five years and changed uses, Svec said. In removing the excess vacant stock, the market has become notably tighter, especially with an increase in demand for storefronts. 

That higher demand is thanks to a significant boost in consumer spending that followed the pandemic as well as the development of omnichannel retail that allows shoppers to buy products online and then pick them up at stores, and to order same-day delivery from retail locations. 

All of those trends really reinforced the value of an in-store network,” Svec said. 

Because of that, retailers have been operating more efficiently, using the in-store network to maintain communication, be a touchpoint for client returns, and aid with last-mile delivery, Svec said. 

Aside from Bed Bath & Beyond’s April tanking and Tuesday Morning’s February bankruptcy, mass closures have been far and few between. In fact, last year the country saw a 15-year low of retail square-footage impacted by closures, Svec said. 

Going into the pandemic, the retail availability rate in the U.S. stood at 5.7 percent, and that increased to nearly 6 percent at the end of 2020, Svec said. However, availability dropped to 4.7 percent by the end of the third quarter of 2023, meaning about 95 percent of all the country’s retail spaces were leased.

So it makes sense for retailers to be clamoring for the spoils of Bed Bath & Beyond’s defeat, but there’s still a handful of risks associated with the plunders, said McKinsey & Company Partner Colleen Baum, who specializes in guiding retailers with expansion and managing costs. 

“They get so excited about the [free] rent in tenant improvement that they’re doing, they haven’t run the full set of economics,” Baum said. “So what happens after the first three years, or the first five years?” 

It is also important to ensure that “this is a location and space that will truly work for you,” Baum added. 

While having some flexibility with the store design is beneficial, moving into a space that does not support the occupancy can be challenging. Retailers “need to figure out how you actually make your proposition come to life within a space that wasn’t designed for you,” Baum said. 

Bed Bath & Beyond was famous for its good locations, but there are some concerns about going into a space that was closed as a result of bankruptcy since the location might not have been performing well, she said. 

When considering those locations, Baum said retailers should try and “deeply understand the intrinsics of the area, what kind of traffic is it getting, what are the trends on that, and then making sure that the occupancy deal that you’ve negotiated is commensurate with the value that you’re getting from a traffic and quality perspective.” 

But with risk comes reward, and Svec expects retail centers to see a huge enhancement from the investment of new retailers.  

“When [the re-tenanting is] all said and done,” he said, “I think the vast majority of these centers will actually end up being more viable post re-tenanting than they were with Bed Bath & Beyond in there.”