The retail landscape in 2024 has seen some major shifts, and “retail store closures” have become a headline-grabbing topic. With a staggering 69% increase in store closures compared to the previous year, the numbers tell a clear story. According to CBS News, over 7,100 stores have shut their doors, signaling big challenges for traditional retail—from rising rental costs to the unstoppable growth of e-commerce (CBS News). These closures have a ripple effect, especially for machinery and equipment (M&E) appraisers, who must now navigate a rapidly evolving market.
In this blog, we will examine how retail store closures are impacting machinery and equipment valuation, from oversupply to shifting market demand.
The Impact of Retail Store Closures on Machinery Valuation
Retail stores rely on various machinery and equipment to run smoothly, including point-of-sale (POS) systems, refrigeration units, shelving, and security systems. When retail store closures happen on such a massive scale, these assets often flood the secondary market. For instance, Family Dollar’s plan to close 600 stores in 2024 alone will likely lead to an oversupply of retail-specific machinery (Yahoo Finance). Similarly, a Walmart store in Columbus, Ohio, auctioned off its equipment after closing in February 2024, highlighting how such closures contribute to a surplus of cash registers, shelves, and other retail fixtures (The Sun).
Here’s what appraisers need to consider:
- Market Saturation: When too much equipment hits the market, prices drop, driving down the value of assets.
- Usage Conditions: Machinery from high-traffic stores may show wear and tear, lowering its valuation.
- Obsolescence: Older retail equipment can quickly become outdated, especially as newer systems integrate better with today’s tech-driven retail environment.
Retail store closures don’t just affect property—they directly shape the machinery valuation landscape.
The E-Commerce Factor: Shifting Demand for Machinery
E-commerce is the elephant in the room when discussing retail store closures. As consumers flock to online shopping, the demand for traditional retail machinery is declining. However, the shift isn’t uniform.
Some retail assets—like shelving and refrigeration systems—are finding second lives in warehouses and fulfillment centers serving online retailers. For example, many vacant shopping malls are being repurposed into logistics hubs, utilizing adaptable machinery to meet the growing demand for e-commerce storage (NY Engineers)
This creates a split market:
- Retail-Specific Equipment: Items like POS systems are seeing steep drops in demand and value.
- Versatile Assets: Machinery that can be repurposed for logistics or warehousing often retains its value or even increases.
For instance, Macy’s plans to close 65 stores by early 2025, a decision driven partly by e-commerce growth, as reported by The Sun. Appraisers need to recognize these market shifts to provide accurate valuations.
Rental Rates and Their Indirect Impact on Valuation
Let’s not forget the role of commercial real estate. Rising rental rates have been a significant contributor to retail store closures. With overhead costs soaring, many retailers are downsizing or shutting down, leaving behind machinery and equipment that’s difficult to sell.
Appraisers face unique challenges when evaluating machinery in this context:
- Bankruptcy Liquidations: Equipment often serves as collateral and must be appraised under distressed conditions.
- Limited Buyers: High supply and fewer buyers can reduce the resale value of assets.
Retail Dive highlights how these financial pressures are reshaping the retail industry—and, by extension, the machinery appraisal market.
Challenges and Opportunities for Appraisers
Retail store closures present both challenges and opportunities for machinery and equipment appraisers. On the one hand, oversupply and shifting market demands complicate the valuation process. On the other, these same trends open doors for specialization:
- Tailored Valuation Models: Incorporate market trends like oversupply and obsolescence to refine valuation methods.
- Market Awareness: Stay ahead by tracking how e-commerce and logistics drive demand for adaptable machinery.
- Collaborative Efforts: Partner with liquidation firms and auction houses for real-time market insights.
By adapting to these changes, appraisers can not only navigate the challenges but also carve out a niche in this evolving market.
Looking Ahead: Building Connections and Enhancing Expertise
The surge in retail store closures in 2024 has rippled through the machinery and equipment appraisal industry. From oversupply in the secondary market to the rise of e-commerce, appraisers face a unique set of challenges. Yet, with these challenges come opportunities to refine expertise, adapt to market demands, and provide invaluable insights to stakeholders.
Connecting with a community of peers in the machinery and equipment appraisal industry, like the growing network at the NEBB Institute, is more important than ever. Engaging with organizations like the NEBB Institute not only enables you to share knowledge and discuss trends but also provides access to tools and certifications, such as the Certified Machinery and Equipment Appraiser (CMEA) designation, to advance your career. Staying updated on industry developments isn’t just a professional advantage—it’s a key strategy for staying competitive in this rapidly changing market. For more information about the NEBB Institute and its resources, visit our About page.
Consider exploring the NEBB Institute’s professional resources and certifications, or participating in industry forums and events to keep informed. These steps ensure you’re prepared to meet the evolving needs of clients and stay ahead of market trends. For a deeper dive into the trends driving retail store closures, check out CBS News’ full report.
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