Philly-Area Shopping Centers Facing Retail Bankruptcy Wave Juggle Pain And Opportunity

Greater Philadelphia is still working through a hefty mass of retail space vacated earlier this year amid a series of high-profile bankruptcies from chains like Bed Bath & Beyond, Rite Aid and Party City.

The bleeding might not be over yet. But players say the market offers opportunities for savvy operators that had been waiting for retail space to open up for some time even as more closures could be on the way.

Mass closures forced more than 1M SF onto the regional market in the first quarter, according to new data from CBRE. 

Move-outs outpaced move-ins by almost 450K SF in the first half, despite a bit of a rally last quarter, when the region posted about 15K SF of positive absorption. The availability rate has risen 60 basis points to 8.1% since Q4 2024.

“We’re still recovering,” CBRE Vice President Patra Konugres said of the brokerage’s report, which doesn't include data from the city of Philadelphia.

But she and MSC principal Doug Green aren't alarmed. In fact, they said that the wave of closures presents a good opportunity for many shopping center owners.

Longtime tenants like Big Lots and Bed Bath & Beyond usually held top-tier spaces that are expected to eventually fetch high rents. These legacy retailers often held longstanding low-rent leases with restrictive covenants dictating neighboring uses.

“You have the ability to unrestrict the shopping center in many cases but, more importantly, backfill the spaces with tenants who can pay significantly higher rents,” Green said.

Green welcomed new supply in a market where high construction and land prices have constrained the retail pipeline for well over a decade.

Even so, the hulking boxes many of these chains vacated are larger than what many modern tenants are looking for. Landlords across the region have had success subdividing them, although Konugres and Green said those projects are capital-intensive. 

A former Bed Bath & Beyond location vacated last year at the Valley Forge Center in King of Prussia has been split in two and re-leased to Trader Joe’s and Five Below, Konugres said.

A similar process is underway at Paramount Realty’s Noble Town Center in Jenkintown, where another Bed Bath & Beyond is being subdivided into two or three locations. Barnes & Noble and Ulta Beauty have expressed interest in leasing there, Green said. 

At Stoltz Real Estate Partners’ Ardmore West Shopping Center, a former Rite Aid is being subdivided into four or five different spaces, he said. 

But not all big boxes are created equal when it comes to subdivision.

“The frontage ultimately dictates how many times it can be split,” Green said, adding this has been a boon for former Rite Aid spaces, which are particularly shallow. “The deeper it is, the less frontage it generally has.” 

New vacancies also present a good opportunity for fitness and experiential retail businesses.

Club Studio Fitness, a boutique gym and wellness center chain, took over a 50K SF former Bed Bath & Beyond location at Federal Realty Investment Trust’s Wynnewood Shopping Center earlier this year. That is expected to open in spring 2026.

Green identified secondary and tertiary suburban markets like Turnersville, Lansdale and Pottstown as places that will likely struggle to lease vacant big-box spaces.

“The supply-demand equilibrium was not as healthy as the primary markets,” he said. “There’s probably an oversupply of space to begin with and not a tremendous amount of demand.”

The wave of retail bankruptcies had a big impact on CBRE’s stats for local submarkets, according to Senior Research Analyst Aliza Kahn.

Boothwyn’s availability rate jumped to 13.1% after a 26K SF Big Lots closed in the Village Green Shopping Center. It has since been leased by Goodwill, which Kahn said will bring the submarket’s availability rate down to 8.1%.

The impact of Big Lots’ demise is also felt beyond the retail world.

The closure of a distribution facility the company operated in Schuylkill County led to more than 500 layoffs and 1.3M SF of warehouse space coming online in the Northeast Pennsylvania submarket last quarter, according to a report from Savills.

Kahn’s analysis also showed that the scars of past retail closures are still impacting suburban Philly’s retail market.

Sears was once among the most ubiquitous American retailers, but the company struggled to adapt to the e-commerce boom alongside many of its department store counterparts.

The eye-popping 26.8% availability rate in the Media submarket is mostly attributable to 180K SF the chain vacated in the Promenade at Granite Run in 2021, Kahn said. 

“If not for the Sears vacancy, this trade area would only have a 7.9% vacancy rate,” she said.

A vacant 70K SF former Sears location on 69th Street in Upper Darby accounts for a big portion of that submarket’s 18.4% availability rate, Kahn said. Meanwhile, the demise of Kmart, a former Sears holding, had a big impact on the Berlin submarket in South Jersey, which posted a 14.5% availability rate last quarter.

The big-box chain closed its location at the Berlin Shopping Center in 2014. The strip mall still hasn’t fully recovered more than a decade later, Kahn said.

Konugres said closures like this will remain a common occurrence.

“I don’t think that it’s necessarily ending soon,” she said. “You’re going to see these legacy retailers that are not keeping up with trends going bankrupt.”