The ~4,000 member church recently completed the first phase of its $28 MM Project SOAR 3.0 to convert the building from its previous use:

As a Kohl’s department store.

For Eagles Nest Church the repurpose former Big Box retail store means more than the establishment of a new place of worship or the return of a vacant property back to a productive use.

Instead it represents a new type of church campus that is not centered on weekly services but as a community gathering spot and destination for a variety of uses.

The repurposed former Kohl’s building now includes a large auditorium with seating for more than 1,000 people.

It is expected to host not only church services but also weddings, graduations, conferences and concerts.

In fact much of the space in the repurposed building will be used for activities that are not directly related to the church.

That is one reason why a rezoning was not required to repurpose the building.

It also means that the property will still be subject to real estate taxes despite the building’s new use as a church-owned religious institution.

Not all of the space will be in use initially—and there are future plans to add dining options, a children’s daycare facility and other functions.

But first Eagles Nest Church will hold a “CrossOver” celebration this weekend to complete the transition of the building from retail to religion.

Or, in other words, to take it “from Kohl’s to souls.”

More Megachurches—And Demand For Larger Real Estate

The adaptive reuse by Eagles Nest Church of the former Kohl’s building is certainly unique.

But it is not original as many other Big Box retail properties have also been repurposed as churches.

That is due in part to the fact that congregations are growing ever larger.

There are now over 1,800 “megachurches”—defined as churches with 2,000 or more members—in the United States.

And as their membership grows, these megachurches often need bigger facilities.

This includes real estate—like former Big Box retail buildings—that has not traditionally been used for churches.

While there are no definitive statistics on the number of church buildings that are the product of Big Box adaptive reuse, it is likely in the hundreds—at least.

For instance more than 40 of the 3,000 Kmart buildings that closed over the past few decades have been repurposed as churches.

Other Big Box retail buildings formerly occupied by Home Depot , Sports Authority and Toys R Us have also been repurposed for church use.

Several of these Big Box-to-church adaptive reuse examples are highlighted below:

A Home Depot-turned-Church and Community Center in Rocky Mount, NC

Word Tabernacle Church converted the former 125,000 square foot Home Depot store in Rocky Mount, North Carolina into a church and community center.

The building was renovated to include an auditorium and chapel as well as areas dedicated for literacy, career planning, health & wellness.

Other sections of the building were repurposed into a media & broadcast area, a fitness center, and a culinary arts and hospitality training.

From Sporting Goods-Anchored Shopping Center to Church Campus in Orlando, FL

A former Sports Authority in Orlando found religion.

Or perhaps religion found it.

In any event, the former Big Box retail building and adjacent shopping center are now home to the 4,000 member Discovery Church's central Orlando campus.

Discovery raised the building's roof and installed a state-of-the-art audio-visual system and LED video wall in its new 1,100 seat auditorium.

A café, classrooms and a youth sanctuary were also added as part of the adaptive reuse of the property.

A Former Toys R Us Provided a West Virginia Church With More Family Space

By 2018 the Centerbranch Church in Bridgeport, West Virginia had outgrown its existing space which was then spread across three different buildings.

It wanted room for a larger sanctuary and more areas for children—including an indoor playground.

And what better building to accommodate additional family space than a 47,000 square foot former toy store?

Not only that but the Toys R Us building was also in a more central location for its congregants, highly visible and conveniently located at a highway exit.

So just one year after Toys R Us closed for good, Centerbranch Church acquired its building on a pad site of Bridgeport's Meadowbrook Mall for ~$2 MM.

It then completed a $3 MM renovation of the former toy store into its new church building.

An Early Kmart Site May Have Been One of First Big Box-to-Church Conversions

The first 18 Kmart stores in the U.S. opened in 1962 and ~1/3 of these stores were in Kmart’s home state of Michigan.

Including the Kmart at the intersection of Plymouth Road and what was then the new M-39 Freeway in the City of Detroit.

Kmart ultimately closed this Detroit store in 1997.

But shortly afterward the New Providence Baptist Church reoccupied the 100,000 square foot building.

Over the years New Providence’s member count has grown from a few hundred to approximately 4,000.

And it has continued to grow into and utilize additional portions of the former Kmart building which now includes a gymnasium, classrooms, conference rooms and a banquet facility.

Additionally, a large portion of the building is now comprised of Detroit Innovation Academy, a Public Charter School with 350 students from kindergarten to 8th grade.

Eagles Nest Grew Large Enough To Fill Kohl’s Building

For Eagles Nest Church the converted Kohls building in Roswell, Georgia is the culmination of the ~15 year old church’s growth and transformation.

The church’s first services in 2012 were attended by a small group and held in a hotel ballroom.

Eagles Nest later moved to larger venues: first to an office building, then a family entertainment center and, most recently, a high school auditorium and gym.

Along the way the church picked up thousands of members and quickly outgrew each of its previous spaces.

However the repurposed former Kohl’s building will now provide the space needed for church members to worship, gather and grow into the future.

The leased sites were set to densify the Dutch Bros footprint in Arizona, Nevada, Texas, and Oklahoma—all states where the Company already operates.

Dutch Bros CFO Joshua Guenser even announced the pending acquisition on the chain’s Q2 2026 earnings call last month.

But the deal to acquire the Salad & Go leases just fell apart.

That is because 7 Brew Coffee, a rival of Dutch Bros that had also been negotiating with Salad & Go to acquire the leases, objected to the sale in a motion filed before the the court late last month.

7 Brew claimed that its latest offer—which was submitted two days after the Dutch Bros purchase agreement was filed with the court—provided more dollar value and certainty of closing.

7 Brew even offered to go through an auction process to ensure that the final price would deliver the most value to the Salad & Go bankruptcy estate.

The bankruptcy court concurred and 7 Brew won the auction with a bid of $143 MM for the leases that is set to close later this month following court approval.

Dutch Bros will walk way with a $3.8 MM break up free for its efforts—but no leases or real estate.

Still the failed Salad & Go deal shows the creative ways that Dutch Bros is pursuing to find real estate to add 800 new shops over the next 3 years.

Even if it means completing more adaptive reuse projects and acquisitions rather than developing custom-built 900 square foot drive thru buildings.

Dutch Bros Has Added Real Estate Fast—But Needs To Move Even Faster

Over the past decade Oregon-based Dutch Bros added nearly ~1,000 shops and now operates ~1,230 units in 26 states.

Dutch Bros continues to grow rapidly with plans to add ~180 new shops in 2026 and operate 2,029 units by the end of 2029.

Some New Shops Have Been Added Via Creative Adaptive Reuse

However, Dutch Bros has been plagued by high construction costs, permitting delays and the significant company resources required to construct its custom-built prototype shops on leased land.

CEO Christine Barone even noted in an answer to an analyst’s question on a 2024 earnings call that ground leases were “the most expensive way for us to spend money to get a shop out of the ground.”

So Dutch Bros has made recent moves to add new units by adaptive reuse and acquisition.

Dutch Bros has already opened a handful of new sites in repurposed former banks, freestanding QSRs and even casual dining restaurants.

Dutch Bros Is Backfilling Space Vacated By Competitors

Dutch Bros is also taking over 2nd generation real estate vacated by competitors.

Like its soon-to-open first store in Seattle which will backfill a former Starbucks endcap suite in a strip mall located in Seattle’s SoDo neighborhood.

Starbucks had shuttered the store in September 2025 as part of a mass closure event that impacted over of its 400 domestic locations.

But Dutch Bros quickly leased the former Starbucks space and is repurposing it for its own use with plans to open later this year.

M&A May Offer Another Path To Secure Real Estate

But Dutch Bros is keeping all of its real estate options open.

Earlier this year the Company took yet another path to source real estate:

In January 2026 Dutch Bros completed its first ever acquisition by acquiring the 20-unit, North Carolina-based Clutch Coffee chain for ~$20 MM.

Dutch Bros repurposed most of the former Clutch Coffee shops within just a few months.

Salad & Go Would Have Been An M&A/Adaptive Reuse Combo

The proposed purchase of the Salad & Go leases would have combined acquisition and adaptive reuse since the real estate would have been secured via bulk purchase but would have still required a relatively quick and inexpensive conversion.

After all, most Salad & Go sites are freestanding buildings that are ~750 - 1,500 square feet—very similar in size and orientation to the ~900 square foot Dutch Bros real estate prototype.

Plus nearly all Salad & Go sites have one of the most important features of a Dutch Bros shop—the drive thru.

~90% of Dutch Bros business is generated via the drive-thru and a critical element of the Company’s real estate and operational model.

Other Creative Real Estate Options For Dutch Bros

Dutch Bros may now pursue more creative and unconventional adaptive reuse options to acquire new real estate.

One option:

Former drugstore real estate.

Over 2,000 drugstores—most which have drive thru lanes—have been shuttered in just the past 2 years.

Perhaps Dutch Bros could partner with another tenant to take the drive thru of a former drugstore building?

Another interesting repurpose option?

The repurpose of in-bay car wash units.

The growth of express conveyor car wash units is rendering many older “in bay” drive thru car washes obsolete.

Some of these former car washes have already been converted by independent shops—and even some national chains—into new coffee shops.

So Dutch Bros may want to explore car wash-to-coffee shop conversions as a means to add new units.

Even rival 7 Brew is pursuing a car wash adaptive reuse.

One of 7 Brew’s first sites in Boise, Idaho is expected to be an adaptive reuse of a former car wash and convenience store property.

7 Brew has proposed to repurpose the vacant Trophy Auto Wash and convenience store building just off the I-84 freeway in southwest Boise.

But instead of demolishing the car wash and porting in a pre-fab stand, 7 Brew plans to renovate the building and utilize the wash tunnel as its drive thru.

The building retrofit may be less expensive and quicker to complete than new construction but 7 Brew is pursuing the adaptive reuse for another key reason:

The city of Boise significantly restricts new drive thru development so 7 Brew is pitching its tunnel drive thru as a “reuse” rather than a new project.

This distinction may allow 7 Brew to renovate the building without first obtaining a variance or a special use permit for the drive thru.

Creativity Is Key For Dutch Bros To Secure New Real Estate

The bottom line is that Dutch Bros will need to be creative in order to source the real estate it needs to reach 2,029 shops by 2029.

That likely means more acquisitions and adaptive reuse.

Even, perhaps, by unique—and unconventional—means.

The good news is that many of these drugstore properties have already been repurposed for other retail and service uses.

Some have even been converted into unique adaptive reuses.

Like as restaurants.

Three examples of drugstore-to-restaurant repurposes are highlighted below and include a Food Hall in Las Vegas, a Korean BBQ restaurant in Louisiana and a Krispy Kreme doughnut hub in Minnesota.

An Asian Food Hall in Las Vegas

A former Rite Aid building in Las Vegas opened in 2024 as the Choengdam Food Hall—the first local Asian Food Hall in Las Vegas.

It features 10 different restaurants that offer everything from all-you-can-eat sushi to Japanese curry, Korean cuisine, poke bowls and even sweets and beverages.

Set up as a food court, each of the independently operated restaurants maintain their own serving counters and kitchens with access to a common dining room area.

But the food offerings differ substantially from a standard food court.

One of the Korean restaurants, Star Kisa House, features banchan—small dishes that celebrate variety, balance, and community—as well as main courses that highlight the heart of Korean cuisine.

Smile Shota, an “all-you-can-eat” sushi restaurant, offers a wide variety of offerings and inviting atmosphere while Curry-Ya focuses on Japanese curry offerings such as curry udon and crispy curry katsu.

Other Cheongdam tenants include GT Poke which offers customizable poke bowls, Downtowner, a sandwich shop that originated in Seoul and Namsan Tonkatsu which serves Korean favorites such as Tteokbokki (stir fried Korean rice cakes), Kimbap (Korean rice rolls with fillings) and Korean-style Tonkatsu fried pork cutlets.

In addition to the food offerings, the Cheongdam Food Hall also includes Broken Coffee, a shop that offers specialty coffee, matcha and other beverages.

Choengdam Food Hall is the first Asian food hall in Las Vegas and quite likely the first former Rite Aid drugstore-to-food hall conversion.

But it is not the only drugstore building—or even former Rite Aid—to be repurposed as a restaurant.

Korean BBQ in Baton Rouge

An ~11,000 square foot former Rite Aid building in Baton Rouge, LA was purchased by an investor group in February 2024.

These investors partnered with a Texas restaurant group to repurpose the building for a restaurant use but it reopened at the end of last year:

As Legend Pot, an all-you-can-eat experience featuring hot pot, Korean BBQ and sushi.

The interior dining room is modern, well lit and expansive.

Each table at Legend Pot is fitted with several hot plates to simmer soup, proteins and vegetables.

There is also a circular grill in the middle of the table to cook meats and a buffet bar of sauces and seasonings to further customize the hot pot offerings.

A Krispy Kreme Doughnut Hub in Minnesota

In November 2025 Krispy Kreme opened its largest doughnut shop yet:

A ~12,000 square foot doughnut “hub” in the Minneapolis suburb of Fridley, MN.

But the development of this new Krispy Kreme doughnut shop was not a standard real estate project for the Company.

Because rather than develop new from the ground up, Krispy Kreme repurposed an existing building into the oversized doughnut shop.

Not just any building, though.

The new doughnut hub is an adaptive reuse of a former CVS drugstore.

This new drugstore-turned-doughnut hub in Minnesota is Krispy Kreme’s largest shop but perhaps not its most expensive new store project.

That is because Krispy Kreme noted that it realized a “20% savings in real estate and capital costs” by developing the shop in a former drugstore building.

The extra large doughnut shop was also a smashing success right out of the gate.

Within just weeks of the new shop’s opening, Krispy Kreme executives called out the strong performance of the drugstore-turned-doughnut hub and predicted that the new shop would generate ~$10 MM in sales in just its first 12 months of operation:

“In November, we opened a Hot Light Theater shop and production hub in the underpenetrated Minneapolis market. This strategic opening generated immediate results, and we expect sales in the first 12 months to be approximately $10 million. This includes fresh delivery, which has already grown to [70 doors]. Minneapolis exemplifies our disciplined, thoughtful approach to capital deployment. We strategically transformed the former drug store into a doughnut shop and production hub designed to efficiently support off-premises distribution.”

Why was a former drugstore building the right choice for Krispy Kreme?

The former CVS building was modern and well-located with easy access to area freeways.

And it came equipped with key infrastructure already in place such as a paved parking lot and even a drive-thru.

Plus the adaptive reuse supported Krispy Kreme’s unique business model.

Krispy Kreme operates a ‘hub and spoke’ real estate network for the production and distribution of doughnuts.

Doughnuts are baked and sold onsite at hubs but also distributed fresh daily (DFD) to “spoke” sites like gas stations, grocery stores and warehouse clubs.

Doughnut hubs are big revenue generators for the Company.

An average U.S. Krispy Kreme hub store generates ~$4.7 MM in annual revenue from on-site sales and those to its DFD spokes.

For context that is 3x higher than annual sales at an average Dunkin’ store!

As a result Krispy Kreme utilizes multifunctional real estate to support its business.

Doughnut hubs serve on-site customers—which means they are ideally located on high traffic roads in major commercial corridors.

They also typically include features that cater to quick service customers such as good access, ample parking and a drive thru pick up window.

But doughnuts baked at Krispy Kreme hub stores are also delivered daily to up to 100 DFD spokes in the area.

So hubs need ample room to produce and warehouse doughnuts, areas to load them onto delivery vehicles and easy freeway access to deliver to DFD spokes.

The former CVS drugstore property checked all the boxes for Krispy Kreme.

The ~12,000 square foot building (which is >5x the size of a standard Krispy Kreme) has a large baking area as well as a dining room where customers can even view doughnut production.

The new doughnut shop caters to quick service customers by utilizing the CVS drive thru window.

It also has areas dedicated to warehousing, DFD staging and the loading of fresh doughnuts onto delivery trucks.

And the convenient location off the busy I-694 highway that bisects the Twin Cities provides for efficient delivery to spokes throughout the metro area.

More Drugstore-to-Restaurant Conversions Could Be On The Way

One reason why additional drugstore-to-restaurant repurposes may be on tap?

Other companies can use these repurpose templates to efficiently replicate these types of conversions.

That is because drugstore chains like Rite Aid and CVS often built the same prototype building in multiple markets during their rapid expansions decades ago.

So the Rite Aid prototype building that Legend Pot repurposed in Louisiana?

The same exact building exists in hundreds of other markets.

Similarly, should Krispy Kreme look to complete another drugstore-to-doughnut hub conversion it may well seek out the same former CVS building that it repurposed in Minnesota—only a different market.

With more than 15,000 drugstore buildings in the U.S. and the likelihood of additional closures in the coming years there should plenty of former real estate available for future repurpose opportunities.

Walmart CFO John Rainey doesn’t think so.

That is because in-store sales no longer tell the whole story about retailer performance.

Particularly for large retailers like Walmart and Target that feature an “omni channel” offering.

For instance e-commerce now comprises 23% of Walmart’s total sales, a 2x increase over just the past 5 years.

And it is still growing fast:

Walmart’s e-commerce sales increased 24% during the fiscal Q2 2027 period that was reported by the Company last week.

However quarterly in-store comps were, according to Walmart management, “down low single digits in Q2, consistent with the trend that began in late Q4 last year.”

But weak in-store comps did not mean the Company’s stores were a drag on performance.

Or that Walmart’s retail real estate was losing relevance.

To the contrary ~80% of Walmart e-commerce orders—and 100% of its fast deliveries—are fulfilled from its stores.

So stores and retail real estate are still vital to generating the vast majority of Walmart’s sales even with the retailer’s omni channel model.

The role of stores has just, in the words of Walmart executives, “evolved.”

The same is true for Target .

Target’s Fiscal Q2 2026 comp sales increased 3.8%.

However Target’s “in-store” comps grew just 2.7% while online sales increased 8.7%.

The biggest area of growth for Target was in same day delivery which posted a ~25% increase during the quarter.

Still Target’s 2,000 retail stores were critical to all of these transactions since the Company fulfills ~95% of online sales—including deliveries—from its stores.

Which means that despite the difference in performance across channels Target’s retail real estate contributed to nearly all of its Q2 sales.

Real Estate Is Still Needed To Facilitate E-Commerce And Delivery

The shift from in-store sales to e-commerce is not new:

More retail sales of all types have moved online in recent years.

That is a key reason why e-commerce now represents nearly a quarter of Walmart’s $700 BB+ in annual sales and has more than doubled over the past 5 years.

But despite the fact that more sales have shifted online, a brick and mortar store network remains core to the performance of most large retailers.

That is principally because a physical product still must change hands in nearly all sales generated by Walmart, Target and other general merchandise, grocery and apparel retailers.

Sometimes that product is picked and paid for by customers in-store.

Other times the product is shipped from the store’s back room or brought out by store personnel and dropped in vehicle trunks in the store parking lot.

Increasingly that product is now even delivered by the retailer or a third party provider direct from stores to customer homes.

This last point is critically important because growth in delivery outpaced standard e-commerce sales increases at both Walmart and Target in the last quarter.

And delivery for both Walmart and Target is rooted in the large fleet of stores that both companies operate very near to the majority of the U.S. population.

Walmart has a store within 10 miles of 90% of the U.S. population and Target operates a store within 10 miles of 75% of the U.S. population.

This expansive retail real estate network is a key enabler of “last mile” delivery and a massive source of competitive advantage for both Walmart and Target.

Walmart even noted that store-based delivery allowed it to achieved faster delivery speeds on a broader product assortment and that expedited deliveries of 3 hours or less represented ~37% of store-fulfilled orders during the past quarter.

So even if “in-store” comps may be less relevant to Walmart, its stores and retail real estate network most assuredly are not.

Walmart Is Adding Dark Store “Depots” To Its Real Estate Network

While Supercenters and Neighborhood Markets comprise the vast majority of Walmart’s retail store network, it is also adding other real estate.

Such as Walmart Depots.

Walmart recently opened several local delivery hubs in markets throughout the country to speed up delivery times and avoid overcrowding of its stores.

These Walmart Depots—which are closed to the public—are designed for rapid fulfillment of high volume grocery and essential products in a local area.

Walmart Depots are 15,000 - 20,000 square feet, or a fraction of the size of a ~180,000+ square foot Supercenter, and are typically suited for 2nd generation retail buildings in dense neighborhood sites.

The objective is for delivery drivers to stop at a Depot, pick up items and deliver them to nearby customers—sometimes in 30 minutes or less—without the need to navigate large and crowded Supercenters and busy Neighborhood Markets.

Walmart is repurposing former drugstore buildings as Depot sites as these properties are widely available, fit the desired size range and are located close to residential populations.

Target Is Modifying Its Real Estate To Support Delivery

In 2017 Target initiated its “stores as a hub” strategy that used all ~2,000 of the Company’s stores to fulfill 95%+ of online orders and deliveries.

One problem:

Despite their convenient locations near to residential populations most Target stores were simply not equipped to handle store-based fulfillment.

This caused issues with customers and employees and led to overcrowded stores, sloppier aisles, long check out lines and more out of stock merchandise.

Last Fall Target shifted its model in certain areas to test fulfillment from select, larger stores that have a real estate and operations setup oriented to fulfillment.

For instance, Target stopped fulfilling online orders at many older, smaller stores in the Chicago area.

Target instead directed these orders to lower volume stores with less in-store traffic as well as newer, bigger stores that had larger back rooms and pack stations.

This change resulted in just 5 stores in the Chicago region handling about 30% of the ship-to-home or local delivery volume.

The operation proved so successful that Target is now implementing this model in dozens of other markets.

How And Where Purchases Are Made May Not Matter—But Stores Still Do

The goal of Walmart and Target as omni channel retailers is to be agnostic about how and where a customer makes a purchase and receives its product.

However this will require Walmart and Target to bring e-commerce margins up to the level of profitability generated by in-store purchases.

Walmart executives noted that the Company is working hard to achieve margin parity in large part by relying on and leveraging Walmart’s Supercenters, Neighborhood Markets and even its new dark store Depots.

Similarly Target continues to modify its real estate and operations to ensure that its stores can efficiently and profitably serve e-commerce and delivery customers.

The stores and real estate network of both Walmart and Target are in prime locations, have been curated over decades and are perhaps the most powerful and durable sources of competitive advantage for both companies, particularly as they compete with native online retailers that are unable to replicate this footprint.

As Walmart’s CFO John Rainey notes:

The more omni [channel] we become the more important our stores become—not less important, more important.”

But sales in the Company’s Do-It-For-Me (DIFM) Pro channel comped positive on a low single digit basis during the quarter.

One element that contributed to Advance Auto’s strong Pro channel performance?

Its growing number of Big Box Market Hub stores.

Market Hubs are ~36,000 square feet—or 5x the size of a standard Advance Auto store—and carry over 80,000 product SKUs.

They serve as both retail stores and mini-distribution centers that deliver auto parts on a same day basis to ~90 area Advance Auto satellite stores as well as to Pro channel customers like collision centers and repair garages.

Advance Auto Parts operates just 38 Market Hubs out of its 4,300 total stores.

However Advance Auto announced plans to increase the number of 2026 Market Hub openings to between 15 and 20 which will comprise over 1/2 of all of its new stores.

Advance Auto is leaning into Market Hubs for additional near-term new store growth and hopes to operate at least 60 Market Hubs by the middle of next year.

The majority of Market Hubs are located in 2nd generation, Big Box suites that were previously vacated by other retailers.

Like the newest Advance Auto Parts Market Hub that opened last month in North Augusta, South Carolina.

It is located in a ~36,000 square foot Lidl grocery store that was built in 2017 but vacated by the German grocer in 2023.

A New Store Concept

Advance Auto introduced the Market Hub store concept just a few years ago.

Rather than seek out new sites, however, Advance Auto instead turned to some of its own underutilized real estate to repurpose as Market Hubs:

The small distribution centers (DCs) that it had inherited from its purchase of Carquest Auto Parts in 2014.

Advance Auto had operated parallel supply chain networks for many years after the Carquest acquisition.

However the repurpose of the Carquest DCs as Market Hubs both consolidated the two networks and accelerated the speed of part delivery times to customers.

This setup makes it far more likely that a part is both in stock and can be delivered quickly to an area customer.

Especially to a Pro channel customer like a collision center or repair garage.

Market Hubs have sped up both service times and part availability throughout the Advance Auto store network and it is showing up in performance:

Company executives have noted that its stores in areas with a Market Hub have generated a comparable sales uplift of ~100 bps over others in its network.

Additionally the effectiveness of Market Hubs has led Advance Auto Parts to reduce to just 16 U.S. distribution centers as compared to the 40 in service as of 2023.

The New Market Hub Real Estate

Advance Auto has retrofitted ~30 former Carquest DCs as Market Hubs over the past two years but is now in need of other real estate to grow the concept.

So where will the Company find sites for these Market Hubs?

Some may be developed via new “greenfield” construction.

But most others will be in 2nd generation Big Box real estate that was once home to other retailers.

For instance An Advance Auto Parts Market Hubs opened last Fall in a ~35,000 square foot former Conn’s Home Plus store in Stone Mountain, GA.

A new Market Hub is also set to open later this year in a ~32,000 square foot former Big Lots suite in North Jacksonville, FL.

Utilizing repurposed real estate is a low cost way to develop Market Hubs.

Advance Auto CFO Ryan Grimsland has noted that the average cost for the Company to open a new Market Hub store is ~$2 MM.

But that amount varies on whether the new store was developed via ground-up construction or in repurposed, 2nd generation space.

Opening a Market Hub in repurposed space provides Advance Auto with more than just a cheaper buildout cost.

That is because rental rates for 2nd generation space are far less than for new construction properties.

This makes Market Hubs in repurposed space more profitable since they not only require less initial capital but also lower rent payments for the lease duration.

Another benefit of 2nd generation space is a quicker timeline to open.

Market Hubs in repurposed space can open in roughly 1/2 the time—or less—than it would take to complete new ground up construction.

Advance Auto hopes that the speed and efficiency from the reuse of existing buildings will help it meet its 60 store Market Hub target by the middle of 2027.

The Biggest Source of Near-Term Growth

Market Hubs are likely going to comprise over 1|2 of new Advance Auto openings over at least the next 2 years.

But because of their large size—at more than 5x the size of a standard store—will likely make up the vast majority of the Company’s square footage growth.

Plus Advance Auto may very well increase its long-term Market Hub target.

After all AutoZone, a key competitor—particularly in the Pro channel segment—is targeting 300 of its comparable “Mega Hub” stores at full buildout.

The outsized role that Market Hubs play in generating sales from Advance Auto’s most lucrative customers make the Company’s ability to execute on these new store openings perhaps its most important near-term operating initiative.

A Customer Service Differentiator

Advance Auto President and CEO Shane O’Kelly notes that the Company’s Pro customers, in particular, have become accustomed to the wider part availability and faster service time provided by Market Hubs.

This is important as Advance Auto anticipates that sales to Pro customers—which include professional installers like collision repair shops—is expected to outpace sales through the “do-it-yourself” retail channel in the coming quarters.

O’Kelly has “consistently heard from Pro customers about the positive impact of the Market Hubs. I’ve also heard it from our independents. If you think about how we would manage this situation in the past, you’d be dependent on the DC, and that’s an expensive pick and a much more time-consuming route to get it to a customer. Often, you don’t end up within a time window that they consider to be acceptable. I’m particularly excited by the next chapter of what we do with our Market Hubs. They increase time to serve.”

The Future Real Estate Plan For Market Hubs

Advance Auto wants future Market Hubs to fulfill demand from ~50 satellite stores in its network rather than the ~90 they serve at present.

This means many more Market Hubs may be needed to provide a consistent level of part availability, service and distribution through its entire network.

So where specifically might Advance Auto source the real estate that it needs to add these additional Market Hubs?

Well the recent bankruptcies of retailers like Conn’s HomePlus, Big Lots and Joann Stores have freed up over 2,000 Big Box sites throughout the country that may be suitable for repurpose as Market Hubs.

Advance Auto has already converted some of these spaces into Market Hubs.

But these sites are in high demand among growing Big Box retailers and may not be available for long.

Advance Auto may need to take a more aggressive approach to secure future sites.

Like by closely monitoring mass store closing events and retail bankruptcies.

Or even bidding to acquire existing store leases in future bankruptcy auctions.

Perhaps the most interesting real estate option may be to co-locate with some of its larger Pro customers in multi-use buildings.

These properties could include a variety of automotive uses under one roof such as dealerships, collision centers, tire service and, of course, auto parts retailers.

After all what better way to increase part availability, accelerate delivery time and reduce costs than by operating in a “one stop” shop for automotive needs.

This would require even larger real estate than standard Big Box retail suites.

Like, perhaps, former “ultra” Big Box buildings.

For instance Autofit, a wholesale auto parts supplier, opened in a 140,000 square foot former Sam’s Club building in San Antonio, Texas.

The AutoFit property in San Antonio is one of at least a half dozen conversions of former Sam’s Club buildings to an automotive use.

The hybrid background of a Sam’s Club building—part retail and part warehouse—may be an intriguing option for an even larger version of a Market Hub.

Or one that co-locates with other automotive uses.

Most former Sam’s Clubs are freestanding buildings with high ceilings, open floor plans, and grade level doors which can work well for auto parts retail.

Plus they are located in major retail corridors and close to Advance Auto customers, often on large land parcels with plenty of parking, good access and signage.

Many Sam’s Clubs had even offered tire sales and auto service—and thus are already a “known” destination for automotive uses.

So Advance Auto may want to think bigger when it comes to sourcing the real estate for future Market Hub stores.

Of course 100,000+ square foot Market Hubs may require another type classification.

Perhaps they can be known as “Super” Market Hubs.

Claiming to be the fastest fulfillment in home improvement retail, Home Depot Express Delivery offers rapid delivery of a wide variety of trade products, materials and supplies for Pro construction projects and everyday do-it-yourself essentials.

With Express Delivery these items are delivered direct to homes and job sites in 3 hours or less.

The service is available for a small flat fee per order but does not require a membership or long-term commitment.

And Home Depot plans to use its existing ~2,350 retail stores as neighborhood fulfillment “hubs” to source and distribute the products.

The stores-as-a-delivery hub strategy makes sense—especially since ~90% of the U.S. population lives within 10 miles of a Home Depot store.

But it also begs the question:

Will Home Depot need to modify or enlarge its stores to better accommodate Express Delivery and store-supported online fulfillment?

Or are there other ways for Home Depot to utilize—or repurpose—its real estate or operations to provide this delivery service?

Some Retailers Are Opening New and Larger Stores To Support Delivery

Many retailers now utilize a “stores-as-a-delivery hub” model and they are increasingly adding new stores in much larger real estate:

• AutoZone— Roughly 1/2 of new AutoZone store openings are now in Big Box Mega Hubs that are 5x the size of the Company’s standard auto parts store; these Mega Hubs are typically in 2nd generation real estate and designed to facilitate rapid delivery of auto parts particularly to AutoZone’s “do-it-for-me (DIFM)” collision center customers

  

• Advance Auto Parts / O’Reilly Auto Parts—Both Advance Auto Parts and O’Reilly Auto Parts are also opening dozens of Big Box hub stores that are much larger than their standard prototypes in large part to support store-based fulfillment and delivery service

  

• Tractor Supply—Many recently-opened Tractor Supply stores are in spaces of ~40,000-50,000 square feet—or nearly 3x the size of the Company’s standard real estate prototype—in part to fulfill online orders and provide “Final Mile” delivery services to nearby customers

Even Costco is increasing the size of some of its new clubs to facilitate store-based delivery.

For instance the new club that Costco is building in Fresno, CA will be ~219,000 square feet, or ~50% larger than a standard Costco Wholesale club.

One reason why the new Fresno club is so big?

It will include a ~47,000 square foot “Market Delivery Operation (MDO)” distribution space where large and heavy items like appliances, furniture, televisions and fitness equipment will be loaded onto box trucks for last mile delivery to Costco members.

Target May Offer A Good Example Of Real Estate And Process Modifications

It is not much of a surprise that retailers that utilize store-based fulfillment and delivery are shifting to new and larger properties.

But Home Depot stores are already quite large.

So to support express delivery Home Depot may just need to make adjustments to its operational processes and modifications to its existing real estate.

Or at least to some of its real estate.

Target may represent a good model for how process changes—and modifications to certain stores—can improve store-based fulfillment and delivery services.

In 2017 Target rolled out its “stores as a hub” strategy in which it used all ~2,000 of the Company’s stores to fulfill 95%+ of online orders and deliveries.

Like Home Depot, Target’s store network provided excellent coverage and reach with a Target store located within 10 miles of 75% of the U.S. population.

One problem:

Many of Target’s stores were simply not equipped to handle store-based fulfillment.

This caused issues with customers and employees and led to overcrowded stores, sloppier aisles, long check out lines and more out of stock merchandise.

Last Fall Target shifted its model in certain areas to test fulfillment from select, larger stores that have a real estate and operations setup oriented to fulfillment.

For instance, Target stopped fulfilling online orders at many older, smaller stores in the Chicago area.

Target instead directed these orders to lower volume stores with less in-store traffic as well as newer, bigger stores that had larger back rooms and pack stations.

This change resulted in just 5 stores in the Chicago region handling about 30% of the ship-to-home or local delivery volume.

The operation proved so successful that Target is now in the process of adopting this strategy in dozens of other markets.

Why Home Depot Is Well Positioned For Store-Based Delivery

As Home Depot shifts more online order fulfillment and express delivery to its stores it may encounter the same issues that led Target to redirect orders to select stores with lower in-store traffic or that were enlarged or specifically fit out for the use.

However Home Depot has several real estate advantages that play in its favor:

• Room For Expansion—while the average Home Depot store has ~105,000 square feet of indoor retail space and a ~24,000 square foot garden area, most sit on large land parcels that can accommodate building expansion if needed to construct pack stations or distribution space for large and heavy delivery items

• Manageable In-Store Traffic And Transaction Volumes—Home Depot stores have less in-store customer traffic and transaction volume than Target stores that sell food and everyday essentials; this means Home Depot can more easily fit out select, lower volume stores—or those with less in-store customer traffic—in large metropolitan areas as its core fulfillment and delivery support hubs while leaving its busiest and high traffic stores to serve in-store customers

• Leverage Existing Fulfillment Centers—for products not suited to store-based delivery, Home Depot can also leverage its extensive network of 200+ “last mile” assets that include direct fulfillment centers, flatbed distribution centers and rapid deployment centers to optimize delivery through its system

Home Depot Wants To Own The Real Estate—And Delivery Operation

It is no surprise that Home Depot—like many other retailers—is introducing initiatives that provide faster and more robust delivery service options.

Fast home delivery drives loyalty and retail giants like Amazon and Walmart are conditioning customers to expect deliveries in hours rather than days.

Express Delivery is also just Home Depot’s latest delivery offering.

Home Depot already offers an extensive same-day delivery services across categories that include lighting, decor and building materials.

The Company also provides next day appliance delivery to ~60% of the U.S. population.

In fact over 55% of Home Depot’s in-stock SKUs were delivered via same or next-day delivery in 2025, more than 3x the Company’s 2022 rate.

These delivery services already work in conjunction with Home Depot’s retail stores and the rest of its real estate network.

But unlike some retailers that are outsourcing delivery to service provides like DoorDash and Instacart, Home Depot is utilizing its own real estate and technology to control the end-to-end delivery operation.

Home Depot employs a “ship from the best location” initiative that utilizes machine learning algorithms to route orders via the optimal fulfillment node.

Sometimes that will be via its store real estate.

After all Home Depot’s ~2,350+ stores are in prime locations, have been curated over decades and provide a durable competitive advantage for the Company.

In other situations the delivery may be best suited from a Home Depot fulfillment center or even via SRS Distribution, the 400-branch wholesale distributor of roofing and building materials that Home Depot acquired in 2024.

The bottom line?

Home Depot has the real estate, technology and internal bandwidth to self-administer its Express Delivery service.

It may just require a slight repurpose of its retail real estate and store delivery model.

The newest Arhaus showroom opened last month in a 35,000 square foot former Crate & Barrel store at the Village of SouthPark in Charlotte, NC.

Arhaus invested over $13 million to build out the new Charlotte space which is nearly 3x the size of one of its average showrooms.

The extra large showroom provides expanded display areas, complimentary interior design services and a “design-forward setting” for clients to experience the Company’s product offering.

Arhaus Is Opening More “Extra Large” Showrooms

The new extra large showroom in Charlotte is not a brand new location for Arhaus.

Instead it is a relocation of the ~10,000 square foot store that Arhaus had opened ~5 years ago in the nearby SouthPark Mall.

It also is not even the chain’s largest showroom.

Arhaus opened that space just last Fall in the Old Town area of Pasadena, CA.

At ~40,000 square feet the Pasadena store is the largest Arhaus showroom in the Company’s history.

And, like the high profile repurposed Crate & Barrel space in Charlotte, the Arhaus showroom in Pasadena is a repurpose of prominent 2nd generation real estate.

It is located in a two story building in the heart of Old Town Pasadena that was previously home to Forever 21 and, before that, a small-format Saks Fifth Avenue department store.

But the art deco-style building—which features an iconic 47-foot tower—dates back to 1925 when it opened as a grand auto service center for Penn Oil & Supply

This unique property required a custom design and buildout rather than the replication of an existing Arhaus showroom format.

The extra large size of the Pasadena showroom also elicited questions of Arhaus executives during the furniture retailer’s Q4 2025 earnings call earlier this year.

Arhaus CEO John Reed commented that the Pasadena store was likely a “one off” project though he noted that the Company is using the expansive showroom to test many initiatives that would not likely have been possible with a smaller store.

On that earnings call Reed denied that Arhaus has plans to add more 40,000 square foot (or larger) stores in the future.

But even Reed’s own words left some uncertainty on the topic, particularly when he was asked a question about the size—and uniqueness—of its showrooms:

“We’re so flexible. And depending on the markets, we can go from 14,000 to 40,000 square feet, and they all work, and they’re all profitable. So we love our model. It’s not just here’s your standard box. It has to be this big sort of thing. And so we’re learning a lot from both ends, the smaller size and the large ones.”

Is Arhaus Replicating the RH Real Estate Trajectory And Model?

The size of these new Pasadena and Charlotte showrooms brings up another interesting question:

Is Arhaus attempting to replicate the “gallery” model of one of its key competitors—upscale furniture and home furnishings retailer RH?

After all RH has employed a similar real estate trajectory:

Start out with relatively small spaces in many markets and then relocate into much larger "gallery" spaces, often in repurposed, 2nd generation real estate.

Now RH galleries are some of the most unique environments in physical retail with expansive product display areas, design services and even other features like bars and restaurants.

They are located in prominent, upscale locations and are designed to elevate, highlight and promote the RH product assortment and provide memorable experiences for customers.

While many galleries are newly constructed properties, RH has completed adaptive reuses of several historic buildings to secure specific, high profile sites.

Like RH’s repurpose of the iconic Boston Society of Natural History building which dates back to 1863 and is one of the oldest properties in Boston’s Back Bay.

After serving as the Museum of Natural History for decades, the building was repurposed in the 1940s for retail use and occupied by department store operators for decades afterward.

Until 2013 when RH completed extensive interior and exterior renovations of the historic property and repurposed it as its Boston gallery.

Three years ago RH also opened a gallery in another iconic historic building:

The Bethlehem Steel Building in San Francisco’s Pier 70 shipyard that was originally built in 1917.

RH restored the 80,000 square foot, neoclassical building and converted it into a unique retail destination.

The property not only serves as an RH gallery but also is home to other amenities such as The Palm Court Restaurant and a Rooftop Park with views of the San Francisco skyline and Bay Bridge.

But perhaps RH’s most unique adaptive reuse project is its Indianapolis-area gallery that opened in 2023:

In the repurposed former home of real estate developer Christel DeHaan.

The estate home, which was built to resemble a Palladian-style villa, has over 60 rooms and overlooks a private lake on a ~150 acre property

The former residence-turned-RH gallery is 42,000 square feet and includes indoor and outdoor amenities as well as an on-site restaurant.

Where Arhaus Showrooms Are Similar To—And Different From—RH Galleries

The new expanded Arhaus showrooms are still not quite as large as most RH galleries.

They are also—for the most part—not located in high profile properties and do not include in-store dining options.

At least not yet.

But the size and locations of these new Arhaus showroom in Pasadena and Charlotte make them more similar to an RH gallery than other Arhaus sites.

They may, in fact, be the first step toward Arhaus reshaping its real estate strategy in the model of RH.

Which means that more large Arhaus showrooms may also be on tap for other historic buildings in high profile locations.

After all Arhaus is dedicated to making showroom browsing an attraction and a great experience for its customers.

The Company believes that its showrooms are the “front door to [its] omnichannel experience” which create “immersive environments where clients fully engage with our brand, our product and our designers.”

CEO Reed has also has a view that “retail is theater and [our] stores should be a place for customer to come and get inspired.”

That is similar to the vision of RH CEO Gary Friedman that retail stores are a stage where customers can get inspired.

Not surprisingly both companies have invested heavily in building out their retail footprint in recent years.

Over the past 5 years RH has added more than a dozen new galleries and entered key international markets.

Arhaus has also expanded its showroom footprint by more than 50% since 2019 to 108 showrooms at present—with plans to expand further.

Which is important for the Company’s growth since ~90% of Arhaus sales come from clients that live within 50 miles of one of its showrooms.

But future Arhaus showrooms may not copy all elements of an RH gallery.

Like, for instance, the onsite restaurants and other amenities—like wine bars and manicured gardens—that are now common in new RH galleries.

In other words, Arhaus might employ many elements of the RH real estate model as it expands and enlarges its showrooms and store network.

But it is likely to keep the focus on the furniture and furnishings.

Last week the bankrupt salad chain announced that it reached a deal to sell up to 65 of its store leases to Dutch Bros for the whopping price of $105 MM.

That is over $1.6 MM per site before the cost to convert the stores and the dead rent expense that would be incurred prior to the stores opening.

But that price may still go higher.

That is because 7 Brew Coffee, a rival of Dutch Bros that had also been negotiating with Salad & Go to purchase the leases, filed a motion with the bankruptcy court last week that asked it to compel an auction of the leases.

So what happens next?

Leases Are Typically Auctioned In Bankruptcy—But Not In This Case

The proposed sale of a bankrupt company’s assets is often conducted through a Section 363 bankruptcy sale.

In this type of sale a bankrupt company markets its assets for sale, selects a buyer and enters into a purchase agreement that then becomes the stalking horse bid.

The stalking horse bid serves as the floor price for other potential buyers to bid against in an auction with the assets ultimately awarded to the highest bidder.

However in this case Salad & Go took a different approach.

First it entered into direct sale assignments with certain buyers for “Key Money” transactions—where each buyer made an upfront payment to acquire leases.

Approximately 21 of Salad & Go’s leases are expected to be sold and assigned in this manner.

Then Salad & Go targeted a subset of buyers for a bulk sale of its remaining leases.

In doing so it focused on specific strategic buyers that were likely to match with Salad & Go’s unique real estate model.

Most Salad & Go units were just 750-1,500 square feet and did not include a kitchen, hood, grill, fry equipment or any dine-in space.

Each site did feature, however, a single or double lane drive thru.

Additionally, the chain’s 130 locations operated in just 4 states—Arizona, Texas, Nevada and Oklahoma—along with several unopened sites in California.

Salad & Go focused on potential buyers that fit 6 key criteria:

• Operated at least 300 units

• Utilized a drive-thru only model (e.g. no dine-in)

• Had a small real estate format (e.g. 750-1,000 square feet with no hood)

• Maintained ample financing (e.g. net worth of $100 MM+)

• Established presence in the Phoenix-area (home to majority of units)

• Capable of opening over 100 units in a year

Not surprisingly Salad & Go focused on coffee or smoothie chains since they were fast growers, operated in small units and did not require a full kitchen or grill.

Two Potential Buyers Quickly Emerged For The Leases

While Salad & Go initially targeted 16 potential buyers, it quickly zeroed in on 2 companies that expressed the most interest and matched its criteria:

Dutch Bros and 7 Brew Coffee.

Salad & Go shared its lease information with the two companies and met with each at their corporate headquarters during the last week of July.

Both Dutch Bros and 7 Brew apparently desired a direct sale rather than via a Section 363 auction process and formulated their bids on that basis.

Salad & Go could have mandated that the offers be subject to a 363 bankruptcy auction but instead warmed to a direct sale approach since it was likely to generate enough proceeds to pay creditors in full and, crucially, was expected to close before Salad & Go ran out of cash to wrap up the bankruptcy process.

After reviewing the offers submitted by the two companies Salad & Go selected the Dutch Bros letter of intent.

It then quickly entered into an asset purchase agreement that provided for a sale that—unlike in a 363 bankruptcy auction—was not subject to higher and better offers.

7 Brew Objects To The Proposed Sale And Submits Another Bid

But when Salad & Go filed a motion last week for the court to approve the sale to Dutch Bros, representatives from 7 Brew coffee objected and claimed that its latest offer—which was submitted two days after the Dutch Bros purchase agreement was filed with the court—provided more dollar value and certainty of closing.

7 Brew even offered to go through an auction process to ensure that the final price would deliver the most value to the Salad & Go bankruptcy estate.

Why Dutch Bros And 7 Brew Are Fighting For The Same Real Estate

Dutch Bros and 7 Brew are not only direct competitors but also are both seeking to add hundreds of new sites over the next several years.

Over the past decade Dutch Bros has added ~1,000 shops and now operates in 26 states.

The coffee chain continues to grow rapidly with plans to add ~180 new shops in 2026 and operate 2,029 locations by the end of 2029.

However, Dutch Bros has been plagued by high construction costs, permitting delays and the significant company resources required to construct its custom-built prototype shops on leased land.

CEO Christine Barone even noted on a recent earnings call that ground leases were “the most expensive way for us to spend money to get a shop out of the ground.”

So Dutch Bros has made recent moves to add new units through adaptive reuse and acquisition.

Dutch Bros has already opened a handful of new sites in repurposed former banks, freestanding QSRs and even casual dining restaurants.

Earlier this year the Company took yet another path to source real estate:

In January 2026 Dutch Bros completed its first ever acquisition by acquiring the 20-unit, North Carolina-based Clutch Coffee chain for ~$20 MM.

Dutch Bros repurposed most of the former Clutch Coffee shops within just a few months and at an estimated cost of a few hundred thousand dollars per unit.

7 Brew—which operates a store format that consists of a ~500 square foot, pre-fabricated beverage stand—operated just 14 sites as recently as 2022.

But the chain rapidly expanded to over 600 stands in 38 states by the end of 2025.

However 7 Brew is also struggling to find real estate—and build scale—in markets where its competitors are well established.

Vacancies are low, new development is expensive and many ideal sites are already taken—often by Dutch Bros, Dunkin’ and Starbucks SBUX 1.84%↑.

7 Brew’s low cost development model and its ability to locate on sites that others cannot access has been key to its rapid growth.

But while inexpensive relative to new ground up development, the cost to acquire a site, prepare a pad and drop in a prefab stand exceeds $1 MM in many markets.

That is one reason why 7 Brew is turning to the adaptive reuse and repurpose of existing real estate to add new units.

2nd generation restaurant sites are often the best repurpose candidates for 7 Brew as they come already equipped with key infrastructure like utilities and driveways.

The Salad & Go units are even more attractive since they provide an opportunity to retrofit an existing building rather than build and deliver a new stand.

That means 7 Brew would likely likely be able to convert the sites quickly and at a relatively low cost.

What Happens Next In The Fight For the Salad & Go Leases

So what happens next?

Well a bankruptcy court sale hearing is set for September 1st.

At that time the court will likely either approve the sale to Dutch Bros or mandate that an auction be conducted—a move that may result in a much higher price for the winner.

But even if the acquisition, dead rent and conversion costs ultimately result in a cost of $2.5 MM or more per site it still might be a good deal for the buyer.

The buyer might be paying a premium for control of the leases—but it would still be acquiring 65 fully built-out, permitted and well-located sites in a single transaction.

That is not a simple feat in today’s real estate market.

Plus the buyer would have the added benefit of freezing out one if its largest competitors from completing the exact same transaction!

In the meantime the costs continue to rack up for bankrupt Salad & Go.

And the ultimate buyer of the leases.

But Burlington has more than doubled its store count over the past decade to more than 1,300 sites (and counting).

So where did Burlington find the real estate to add over 700 new stores in 10 years?

Largely from space vacated by bankrupt retailers.

Over 40% of Burlington’s net new store openings over the past decade were in real estate vacated by just 5 bankrupt retailers:

Kmart, Bed Bath & Beyond, Toys R Us, Joann Fabrics and Sports Authority.

Burlington now operates a store in:

• Over 80 former Kmart buildings

• More than 75 Bed Bath and Beyond suites

• Over 55 former Toys R Us stores

• At least 45 Joann Fabric store sites

• Approximately 40 former Sports Authority sites

Another interesting point about these backfills?

Burlington secured much of the space without even negotiating a new lease with landlords.

Instead it purchased leases of 64 former Bed Bath sites and at least 45 former Joann Fabrics’ stores during bankruptcy auctions.

These lease acquisitions provided Burlington with immediate access to the spaces without having to compete with rival retailers or even execute new leases.

Leases acquired from retailer bankruptcy estates have comprised a significant percentage of Burlington’s recent store openings.

Close to 1/3 of Burlington’s 2025 new stores were comprised of leases that the Company acquired of retailers that filed for bankruptcy in 2024 and include:

• 15 Conn’s Home Plus leases

• 13 Big Lots leases; and

• 2 Party City leases

While Burlington’s lease acquisition strategy has enabled it to rapidly acquire large blocks of desirable real estate it did so at a significant cost.

For instance Burlington purchased the 64 former Bed Bath leases for ~$12 million and then paid ~$20 million in rent on those leases prior to even opening stores at the leased sites.

Additionally, Burlington funded the buildout and renovation of the former Bed Bath spaces without any contributions from Landlords.

Another issue with the lease acquisition strategy:

Some landlords are not happy when Burlington acquires leases in their shopping centers.

In February 2026 Burlington Stores BURL 0.48%↑ bid $22 MM to acquire 22 leases of Saks Off Fifth, the off price division of Saks Global.

Saks Global had filed for chapter 11 bankruptcy in January 2026 with plans to divest its off price stores and restructure as an exclusively a luxury retailer.

For Burlington it was an excellent opportunity to add a critical mass of stores that fit with both its off price retail model and its near term store growth plans.

The Saks Off Fifth leases may comprise up to one fifth of the ~100 new stores that Burlington plans to open in 2027.

But first the lease sales needed to be approved by the bankruptcy court—and some Saks Off Fifth landlords were not happy with the proposed transaction.

A few landlords objected because they allege that the presence of a Burlington store would “destroy” their shopping center’s image as a home to luxury brands.

Others complained that a Burlington store would not be a permitted use in their shopping center and may trigger co-tenancy violations that could allow other tenants to either terminate their leases or pay lower rent.

Still the sale of at least 7 of these leases was approved by a bankruptcy judge this past Spring.

Additionally a separate—but related—settlement was reached between Saks and Simon Property Group SPG 0.78%↑paved the way for additional Burlington lease purchases as Simon Property Group is both one of Saks’ largest landlords and the owner of several properties with leases that Burlington sought to acquire.

So where might Burlington add new sites in 2027 and beyond as it marches toward its long term target of 2,000 stores?

It may just depend on the retailers that file for bankruptcy in the coming years.

A 15,000 square foot building in a Lake Geneva, Wisconsin shopping center that was formerly occupied by craft retailer Joann Fabrics.

Natural Grocers aggressively pursued the former Joann space in Lake Geneva to be its first Wisconsin store.

In fact the Company did not even wait to negotiate a lease with the shopping center’s landlord for the building.

Instead it acquired the Joann lease in an auction held last year during the craft retailer’s bankruptcy.

This meant that Natural Grocers assumed all obligations of the lease—including to pay rent immediately despite the fact that it would take more than a year to open.

Additionally, it also obligated Natural Grocers to take on the cost of the adaptive reuse without a contribution from the landlord.

But Natural Grocers, which operates 173 stores in all 21 states west of the Mississippi except California, secured the site for its first Wisconsin store without having to compete with other retailers for the space.

Now the specialty grocer, which primarily sells organic food and produce, vitamins and supplements, is planning to open additional stores in Wisconsin.

The 2nd Natural Grocers store in the state is expected to open this Fall in Appleton, Wisconsin.

Not surprisingly it will be in yet another former Joann Fabrics space.

That the first two Natural Grocers stores in Wisconsin are in repurposed retail space is no surprise:

Natural Grocers has backfilled dozens of 2nd generation retail buildings including Big Box retail suites, former drugstores and vacant grocery stores.

It has even completed an adaptive reuse of a former theater into a grocery store!

All 9 of the Natural Grocers new store openings in 2026 are in repurposed real estate.

These include a pair of former Rite Aid drugstore buildings:

A site in Walla Walla, Washington that opened in May and another in McMinnville, Oregon that opened earlier in July.

In April Natural Grocers opened a new store in 2nd generation space within the White Mountain Mall in Rock Springs, Wyoming.

And the first Natural Grocers 2026 new store opening occurred in March in a suite vacated by Shoe Dept. Encore in Ruidoso, New Mexico.

The newest Natural Grocers site opened last month in a repurposed former grocery store in Rapid City, South Dakota that had been vacant for years.

These projects are all part of Natural Grocers’ real estate strategy to upgrade and add to its store base in a cost effective—and sustainable—way.

Natural Grocers by Vitamin Cottage is not a high flying unit grower.

The specialty grocer was founded by Margaret and Philip Isely in 1955 and had just 11 stores when the Iselys' children acquired it in the late 1990s.

Even though Natural Grocers has added more than 160 stores over the past 25 years, the Company is still managed by members of the Isely Family and opens new units at a careful and methodical pace.

In fact prior to 2026 Natural Grocers had added a total of just 7 net new stores over the previous 5 years.

However, during that same period the Company also relocated many of its existing stores into better real estate.

In the past 3 years alone Natural Grocers relocated at least 10 stores—all into repurposed 2nd generation real estate.

Natural Grocers has even completed some creative adaptive reuse projects.

Like its repurpose of The Casa Linda Theater in Dallas, Texas.

The Casa Linda Theater opened as a single screen theater in 1945.

A second screen was added in the early 1970s and a few years later the Casa Linda expanded to four screens in a little over 12,000 square feet.

It operated until 1999.

While a few chains considered taking over the classic theater to continue operating it as a cinema, the space sat vacant for about a decade.

Until Natural Grocers completed an adaptive reuse of the former theater into a grocery store.

Quite a bit of work was necessary to convert the space—including a roof replacement, leveling of the floor and removal of load-bearing walls.

Still the cost to complete the theater adaptive reuse was less than it would have been had the Company developed a new store from the ground up.

The theater-turned-specialty grocery store now has a unique look:

The interior of the former theater building looks like a typical Natural Grocers store.

But Natural Grocers preserved the exterior and facade of the building and put its own unique twist on the original art-deco marquee.

Adaptive reuse of 2nd generation commercial real estate will likely remain a key strategy for Natural Grocers as it opens additional new stores.

That is because the repurpose and reuse of 2nd generation buildings is both a cost effective way for Natural Grocers to add to and upgrade its real estate and consistent with the Company’s foundational support for practices that promote sustainability.

For instance Natural Grocers prioritizes organic produce that is produced using sustainable and regenerative agricultural practices.

Additionally, the Company stopped using disposable plastic bags in 2009—a move that has likely prevented over 600 MM plastic bags from ending up in landfills.

Natural Grocers has also reduced its carbon footprint by implementing “green” practices like LED lighting, extra insulation and the use of non-toxic materials.

But this emphasis on sustainability starts with the Company’s real estate strategy which is rooted in the adaptive reuse use of 2nd generation buildings.

After all the repurpose of existing buildings is perhaps the most sustainable way to add new stores since it preserves existing resources, results in lower carbon emissions and less construction waste and also puts obsolescent properties back to a productive use.

New buildings can be constructed using materials and practices that are more sustainable those used in the past.

But often the most “environmentally friendly” development strategy is to make use of existing buildings whenever possible.

But the 2.1% comparable sales decline in Q2 2026 was an improvement over the negative 3.7% rate the retailer posted in Q1 2026.

Still Floor & Decor projects that comparable sales will likely be negative for all of 2026.

Will 2027 be a better year for the flooring retailer?

An improved housing market would likely be the most important catalyst.

But future quarterly results will also include more of Floor & Decor’s recently opened stores in the comparable base.

Like the 20 new stores that the flooring retailer added in 2025 and, eventually, the 20 additional stores it is opening in 2026.

These new store classes are quite different than many of the 286 warehouse-style stores that Floor & Decor operates across the U.S.

Because they are much smaller.

The new stores that Floor & Decor opened in 2025 and 2026 are, on average, ~55,000 square feet, substantially smaller than the retailer’s legacy ~80,000 square foot real estate prototype.

Floor & Decor is utilizing this smaller store format to enter secondary markets and increase store coverage in high density areas.

They are also expected to save the Company millions in new store development costs.

Floor & Decor expects to spend ~$7.5-$8 MM to open a new store in 2026, much lower than the ~$12 MM that the retailer spent to open a new store in 2023.

While some of these cost savings are due to the smaller size of the new sites, there is also another reason why these stores are more economical:

Nearly all of them are located in 2nd generation real estate.

In fact all 5 of the Company’s new store openings in Q2 2026 were in repurposed Big Box retail space.

Most stores that Floor & Decor opened in 2025 were also in smaller format buildings previously occupied by Big Box retailers, grocery stores and even theaters.

These new—and smaller—Floor & Decor stores in repurposed sites include:

• A ~45,000 square foot store in a former Conn’s HomePlus in Winston Salem, NC

• A ~55,000 square foot ex-ShopRite grocery store in Cortlandt Manor, NY; and

  

• A ~41,000 square foot converted Studio Movie Grill theater in Scottsdale, AZ

Floor & Decor’s new 2026 stores also include some that are located in small markets.

Like a new store that Floor & Decor opened last February in a repurposed former Conn’s HomePlus furniture store in Fayetteville, NC.

Floor & Decor considers Fayetteville, NC, with a metro area population of less than 400,000 people, as a “Tier 3” market.

Still many of Floor & Decor’s 2026 openings are in larger Tier 1 and Tier 2 markets where new stores tend to generate higher sales volumes.

One example is a recently opened Floor & Decor store in Staten Island, NY, a Tier 1 market.

This Floor & Decor Staten Island, NY store is located in a ~50,000 square foot former Macy’s Furniture Gallery.

Another benefit of Floor & Decor’s use of 2nd generation real estate?

Stores in repurposed space opened in a fraction of the time that it would have taken had the retailer opted for new, ground-up construction.

As a result Floor & Decor’s increased reliance on 2nd generation real estate has resulted in both lower cost and faster-to-access stores.

Of course Floor & Decor is not the only retailer that is saving money and time by locating new stores in repurposed real estate.

Off price and discount retailers like Burlington Stores , Ollie’s Bargain Outlet , and Dollar Tree utilize 2nd generation real estate for nearly all of their new stores.

These retailers also frequently backfill suites that were previously occupied by their competitors—which provides both a real estate and market share capture opportunity.

These “warm” spaces vacated by competitors often come with customers of the former occupant and tend to result in highly productive and profitable new stores.

However none of Floor & Decor’s new stores benefit from this setup.

Floor & Decor’s repurposed sites like former furniture stores, grocery stores and movie theaters may be in good locations.

But the flooring retailer is not likely to attract grocery store shoppers or customers of the movie theater.

Nor will it benefit from a direct business or market share capture opportunity.

So while 2nd generation real estate may provide Floor & Decor with lower cost and easier-to-access real estate, it is not likely to impact new store productivity.

Or at least not to the same degree as if the previous occupants had sold hard surface flooring, installation materials or tile!

Of course if Floor & Decor were to find 2nd generation space recently vacated by direct competitors like Home Depot, Lowe’s, The Tile Shop or LL Flooring…

Well that could offer repurpose opportunities that not only provide low cost real estate but also a built-in customer base and enhanced new store productivity.

In any event smaller—and less expensive—new stores are in Floor & Decor’s plans for the rest of 2026 and beyond.

The key question is whether these new small format stores will increase Floor & Decor’s market penetration, bring in new customers and help return the Company to printing positive comparable sales.

Or if they instead cannibalize existing stores, bring down average sales and profit per store and act as a drag on the Floor & Decor network.

The answer will soon be clear.

In 1958 brothers Jerry and Al Lapin opened the very first IHOP restaurant in Los Angeles.

As the Lapin brothers expanded the IHOP concept in the 1960s they wanted a real estate prototype that was both recognizable and also invoked “homey” vibes.

So they settled on rectangular floorplan with an A-Frame design and sloped blue roofs that could fit on a small land area and was immediately identifiable.

Throughout the 1960s and 1970s IHOP franchisees built and opened hundreds of blue roof, A-Frame restaurants throughout the country.

But the last A-Frame IHOP restaurant was built in 1979.

Dozens of the A-Frame IHOPs still remain in operation after having been renovated over the years and updated with the chain’s current branding.

Other A-Frame IHOPs closed as franchisees relocated or, in some cases, did not have their franchise agreements renewed.

As a result many of the original A-Frame buildings were later demolished.

But some have instead been converted into other types of restaurants—or even repurposed for altogether different uses.

IHOP A-Frame Buildings That Now House Other Restaurants

Several former IHOP A-Frame buildings were re-tenanted by other restaurants.

One example is the Kasabi Hibachi & Sushi Express restaurant that opened in the former IHOP building in Wood River, Illinois.

An A-Frame former IHOP in California even re-emerged as a trendy restaurant.

The Culver City, California IHOP was initially converted into the aptly named A Frame Hawaiian-themed restaurant for nearly a decade and later became Best Bet, described by its founders as a California-meets-Italy pizzeria.

An IHOP That Became A Nail Salon And Now…A Pilates Studio?

The IHOP in Westport, Connecticut was built in 1969.

It operated continuously in the 3,000 square foot property on Post Road until 2005.

The restaurant reopened as the Westport Pancake House before closing for good in October 2011.

In 2014, a nail salon operator leased the former IHOP, completed a significant interior renovation and repurposed it into Thaeroa Nails and Spa.

However, the nail salon closed in 2021.

But the building owners lined up another next tenant to take the space:

JETSET Pilates which is set to open later this year.

From IHOP to Tailor Shop

The IHOP in Dewitt, New York opened in 1970 in a 3,000 square foot, blue roof A-Frame building on a three quarter acre site in the Syracuse suburb.

The restaurant operated continuously until 2015 when IHOP decided not to renew the franchise contract.

After a brief conversion into the Mac's Local Yolk breakfast and deli, the building was put up for sale in 2018.

A few years later it was acquired by Kim’s Tailor Shop for $500,000.

The local tailor and clothing shop had been located in a tiny 500 square foot space—but the 3,000 square foot former IHOP building offered a larger space.

The new owners painted the building and added building-mounted signage and light fixtures, thicker frames around the windows and a roof snow guard system.

These changes to the exterior and facade of the building were fairly extensive.

So it is possible that customers of the re-branded Kim’s Tailor & Formal Wear store may not know that the building was once an original A-Frame IHOP restaurant.

After all it is generally where people want to be:

Good views, lots of people around, excellent locations, plenty to do.

And it is scarce:

Nobody is “making any more” lakes or oceans.

A type of retail real estate that shares these characteristics is...

Regional Power Centers.

The comparison is not as far fetched as it may seem.

Power Centers are large, open-air retail properties that are home to one or more category-dominant anchors like Costco , Home Depot , Target or Walmart .

These anchors operate large, 100,000+ square foot stores alongside a dozen—or more—Big Box retailer co-tenants.

Power Centers are quite large.

Many include over 500,000 square feet of buildings on 100+ acre land parcels.

Most Power Centers also include a number of “outlots,” or buildings in the parking field that are home to small shop tenants, restaurants, banks and other service providers.

The first thing they have in common with waterfront real estate:

Both properties attract people. Lots of people.

While the parking lots at Home Depot and Costco may not be as scenic as the views out on a lake, the number of people that come and go from these centers is exactly what retailers, restaurants and service providers look for in a location.

Like waterfront real estate, regional Power Centers also offer visitors plenty to do.

Customers come from significant distances to visit not only the key anchor draws but also the adjacent retailers—which makes for a "one-stop" shopping experience.

Landlords also benefit from this tenant diversity.

The collection of retailers that tend to locate at Power Centers are some of the most credit worthy tenants available.

And these tenants very much want to be there:

Many retailers will only open a store in a particular area if space is available in their desired Power Center.

If that center has no vacancies, these retailers will often wait for a future space to come available rather than locate in an inferior spot.

That makes Power Center space quite valuable—and quick to fill up if a tenant leaves.

For instance, Sports Authority operated ~40,000 square foot Big Box stores in Power Centers throughout the country prior to its 2016 bankruptcy.

But all ~460 of its stores closed after the sporting goods retailer liquidated in 2017.

The space, however, did not stay vacant for long:

~95% of Sports Authority spaces were backfilled within just 3 years.

Sometimes retailers even take more aggressive actions—like acquiring the leaseholds of bankrupt retailers—to secure spots at Power Centers.

Burlington spent tens of millions to acquire more than 100 leases of bankrupt retailers Bed Bath & Beyond and Joann Stores.

These lease acquisitions provided Burlington with immediate access to spaces without having to beat out rival retailers or even negotiate new leases with Power Center landlords.

The upshot to landlords?

They received uninterrupted rent payments—even though it took Burlington months to renovate the stores—and did not have to lay out any improvement dollars.

The scarcity factor of Power Center space is also quite real.

Industry trade group ICSC estimates there are just over 2,200 Power Centers in the U.S.

However few Power Centers have been developed over the past decade and there is not expected to be much future development in most areas.

That is largely due to the challenge—and cost—to assemble, acquire and build on large land tracts in attractive markets.

But perhaps the bigger issue is that the best Power Center locations were already taken long ago and they cannot just be built anywhere!

So to sum up:

Power Centers are in good locations, offer plenty to do and act as a magnet to attract customers from miles away.

This combination of factors makes them highly desired, valuable, scarce and near-impossible to replicate...

Just like waterfront real estate.

Still the Company opened 28 new stores during the quarter—in addition to the record 40 new stores it opened during Q1 2026.

But Tractor Supply also announced that it would dial back its 2027 new store openings to 85-90 rather than the 100 that it had originally planned.

Instead the Company wants to deploy capital to upgrades of existing stores and other initiatives like Project Fusion remodels and final mile delivery.

However even though Tractor Supply may open fewer new stores next year, it may still grow its overall square footage in line with—or above—its original forecast.

That is because many of these new stores are much larger than its historical average.

Tractor Supply’s standard new construction prototype building is ~22,000 square feet.

This model is perhaps the Company’s most common among its 2,400+ stores that are primarily located in small towns and rural markets.

But many new and recently-opened Tractor Supply stores are in “2nd generation” real estate that had been previously occupied by other retailers.

For instance ~1/4 of the Company’s Q1 2026 new store openings were repurposed Big Lots sites that resulted from Tractor Supply’s acquisition of 19 of the bankrupt retailer’s leases in May 2025.

These former Big Lots stores are quite large:

One Big Lots-turned-Tractor Supply store in Lakeland, FL is ~40,000 square feet—or nearly 2x the size of its freestanding new construction prototype.

These larger sized “hub” stores provide Tractor Supply with extra square footage for other initiatives that can improve new store productivity.

Like room to support Tractor Supply’s “Buy Online, Pick Up In Store” (BOPIS) fulfillment and curbside pickup as ~80% of online orders are picked up in store.

Additionally, these larger hub stores enable store fulfillment of online orders via Tractor Supply’s final mile service in which the Company makes in-house delivery of big and bulky items direct to customer homes.

Tractor Supply plans to deliver ~95% of large-item orders itself by 2030.

Tractor Supply’s use of large, 2nd generation real estate also offers other advantages.

New stores in repurposed retail suites are much less expensive to open than developing a new building from the ground up.

Plus new stores can be opened much faster in 2nd generation space.

For instance in Q1 2026 Tractor Supply opened stores in half of the 19 Big Lots sites that it purchased in May 2025.

But the other 1/2 of former Big Lots-leased stores opened last Fall—just months after the leases were acquired.

Another benefit is that Tractor Supply can pair 2nd generation real estate with its Project Fusion localization initiative that tailors store merchandise to the area.

This has even led Tractor Supply to open new stores in affluent suburban areas—a previously untapped market for the rural-focused retailer.

For instance last year Tractor Supply opened two large new stores in vacant former supermarket spaces on tony Long Island.

Including a site in West Babylon, NY that is over 50,000 square feet.

Another large and less-rural new Tractor Supply store opened last year in a ~47,000 square foot former Toys R Us in the Los Angeles suburb of Ventura, CA.

These suburban Tractor Supply stores stock merchandise and provide services that cater to an affluent, suburban demographic.

Like a large Carhartt “store-in-store” with ample product displays for the increasingly trendy workwear maker.

As well as in-store vet clinics and an expansive pet food—and pet wash—section that focuses on dogs and cats rather than equines and bovines.

In other words, more space in rural markets for animal feed, livestock supplies and tools for farm and ranch maintenance.

While stores in exurban and suburban areas emphasize apparel, seasonal decorations, pet food and services like washing, grooming and veterinary care.

Utilization of large 2nd generation retail space is not new for the Company.

For instance, over 100 Tractor Supply stores are located in parts of former Kmart buildings.

And ~10% of Tractor Supply's new store openings between 2020 and 2022 were backfills of former Shopko buildings in the Upper Midwest.

These freestanding buildings—which were as large as 35,000 square feet—were made available after the rural-focused retailer’s bankruptcy and liquidation in 2019.

So while Tractor Supply may open fewer new stores in 2027 than it had planned, the Company may add even more square footage than initially forecast.

These large, 2nd generation sites:

• Will likely be cheaper to build and faster to open than new construction

• Are often in prime locations such as high traffic shopping centers in densely populated suburban areas

• Can offer good opportunities to unveil Project Fusion initiatives like a tailored, “localized” merchandise offering

• Provide instant access to an established shopper base and even the opportunity to capture sales of the prior occupant

• Come with a larger-size footprint that enables BOPIS, final mile delivery and other online fulfillment initiatives

Ultimately fewer—but larger—new stores are like on tap for Tractor Supply in 2027.

But the bigger question still remains:

Will all this extra space help the Company reverse its recent negative comparable sales trends and return to growth?

But over the past several months its bankruptcy estate has been busy liquidating the Company’s remaining assets.

Including the 126,000 square foot aircraft maintenance hangar at Detroit Metro Airport (DTW) that Spirit had constructed in 2016 for ~$32 MM.

Spirit had built the hangar on a 10 acre land parcel that is located on airport grounds and was leased from the Detroit Metro (DTW) Wayne County, MI Airport Authority that owns and operates DTW.

At the time of Spirit’s bankruptcy filing the ground lease had approximately 20 years of remaining term with two 10 year options—and the Spirit bankruptcy estate had been marketing the lease to potential buyers for the last couple of months.

However a bankruptcy court filing this afternoon revealed that the DTW Airport Authority is acquiring the hangar lease from the Spirit bankruptcy estate for $18 MM.

The former Spirit hangar is a large span building that is 44’ high with a 318’ clear span and has 4 free-floating rolling doors.

It features engine, seat, and sheet metal shops, a painting booth, an employee training area and can hold up to 3 Airbus A321 narrowbody aircraft with space for 4 additional planes on the adjacent ramp.

The DTW Airport Authority’s offer was the only qualified bid that was received by the Spirit Airlines bankruptcy estate for the hangar lease.

It was also the same price that the DTW Airport Authority had offered to pay for the hangar in April 2026 had Spirit emerged from bankruptcy.

That deal was a proposed sale leaseback arrangement with Spirit where the airline would have paid rent of $1.6 MM annually to the DTW Airport Authority if it had purchased the hangar lease.

The proposed rent reflected the DTW Airport Authority’s “current published lease rates for improved property” per the table below in the April 2026 court filing:

Component Square Feet Rate ($/SF)

Hangar 126,000 $9.048

Ramp/Apron 155,889 $2.259

Parking Lot 50,925 $0.585

Land 127,822 $0.538

However, when Spirit failed to emerge from bankruptcy and ceased operating, the DTW hangar deal was off.

At least for the time being.

In June the Spirit Airlines bankruptcy estate asked parties interesting in acquiring the DTW hangar lease to place a bid for the asset no later than July 16, 2026.

If no parties had bid to acquire the hangar lease, ownership of the hangar building would have reverted to the DTW Airport Authority for no additional consideration.

However the DTW Airport Authority yet again submitted a bid to acquire the hangar lease—and at the same $18 MM price it had been willing to pay in connection with the proposed sale leaseback with Spirit Airlines.

All of which means that the DTW Airport Authority likely has another tenant “in tow” to step in and lease the hangar.

Perhaps even for the same $1.6 MM annual rent that Spirit had been willing to pay—and which would yield the DTW Airport Authority an initial 9% return on its $18 MM investment to acquire the hangar.

But a lease to another passenger airline—like Delta or Frontier—or even a cargo or charter operator may provide even more value to the DTW Airport Authority.

Especially if it results in increased flights and service activity at DTW.

Prior to filing for bankruptcy Spirit had been the 2nd largest air carrier at DTW with an ~11% market share and annual passenger enplanements of ~1.7 MM.

While it was not the leading carrier on any of the top domestic 20 routes from Detroit, Spirit carried ~1/3 of passengers on roughly a dozen key route pairings.

Not only that but Spirit also paid millions in landing and user fees to the DTW Airport Authority as well as other payments to lease airport space for offices and aircraft gates.

So while a lease with a new airline tenant for the former Spirit hangar would provide the DTW Airport Authority with a reasonable return on its new investment, the more significant benefit may be if that new tenant brought back some of activity—and revenue—that was lost in the Spirit liquidation.

Most projects are “one-off” and difficult to replicate.

As a result adaptive reuse is generally an inefficient way to add a large volume of new sites.

While the repurpose of an existing building may be less expensive than new construction, fast growing companies cannot leverage the time, work and plans involved in the adaptive reuse across multiple sites.

Contrast that to developing a prototype building new from the ground up.

Many construction teams know the cost to build to the penny—and have value engineered and improved the model over time.

But some adaptive reuse opportunities can be “repeatable.”

Like of drugstore real estate.

That is partly because there is plenty of availability:

More than 3,000 drugstores closed over just the past three years, leaving plenty of vacant real estate available for growing companies to repurpose.

But there is a key reason why drugstore adaptive reuse has been repeated by many tenants and users:

There is uniformity of these former drugstore buildings across markets.

A vacant Rite Aid building in Pennsylvania?

That exact building may be found in New York, Michigan, Ohio and other markets where Rite Aid developed properties during the same time period.

The same is true for many Walgreens and CVS buildings.

Therefore tenants and users that repurpose the same prototype drugstore buildings—even in different markets—can leverage a single development template.

That makes the planning and construction process for these adaptive reuse projects more efficient and cost effective.

Not surprisingly a significant number of former drugstore buildings have been re-tenanted or repurposed by the same tenants or types of users.

4 of the most common “repeatable” drugstore adaptive reuses are highlighted below:

DOLLAR STORES

Dollar General and Dollar Tree are the two largest U.S. dollar store chains.

And, perhaps, the two single users that have backfilled the most former drugstore buildings.

Dollar General, in particular, has repurposed dozens of recently-vacated Rite Aid drugstores—especially in small town and rural markets.

While Dollar General previously constructed new stores in these markets, the backfill of a former drugstore is much less expensive and enables the Company to open a new store in weeks rather than months.

Vacant drugstore buildings are also often the only available 2nd generation properties available for repurpose in these small towns and rural markets.

Another benefit to Dollar General of drugstore repurposes?

Former drugstores come with a built-in base of shoppers that have frequented the sites for years, even decades.

Dollar General executives have acknowledged that drugstores are the Company’s “largest share donor” in the consumables category.

Even though drugstore buildings are nearly 2x the size of a standard ~8,000 square foot Dollar General store, they have frequently been repurposed by the Company as DG Market stores.

DG Markets resemble “mini” grocery stores as they allocate substantial selling area to fresh food, produce, refrigerated goods and health and beauty products.

Drugstore-to-DG Market conversions have been most common in Michigan, Ohio and Pennsylvania.

That is because those three states accounted for ~40% of the 2,000 Rite Aid drugstores that closed after the chain’s 2023 and 2025 bankruptcies.

Additionally many of the former Rite Aid drugstores in these three states were located in small and rural communities where Dollar General dominates.

EXPRESS CAR WASH UNITS

Multiple car wash chains have repurposed drugstore buildings as new express conveyor belt car washes.

These adaptive reuse projects have been completed across the country.

But two chains in particular—Mid-Atlantic-based Flagship Car Wash and Express Wash Concepts, a 140+ unit operator in the Midwest—have made drugstore adaptive reuse a core part of their real estate growth strategy.

Flagship Car Wash recently repurposed three former Rite Aid properties in New Jersey and Pennsylvania as car washes.

All three were of the exact same prototype building.

Flagship retained the core and shell of the ~12,000 square foot former drugstore and constructed wash tunnels inside the building.

Similarly, Express Wash Concepts repurposed a pair of identical Rite Aid buildings in the Pittsburgh area as new car washes.

It also converted a common Walgreens prototype building in the Cleveland area into a car wash.

The repeatability of drugstore-to-car wash conversions is just one of the reasons these repurposes are becoming more common.

After all drugstore real estate has many of the same characteristics that car wash chains seek when looking for new sites—like hard corner locations with high traffic flow, visibility and multiple vehicle access points.

Plus at the same time drugstores are closing, express car wash chains are adding sites.

Over 500 new car washes opened in 2025 alone in the U.S. with thousands more expected to be developed by the end of the decade.

Another benefit to growing car wash chains of drugstore adaptive reuse?

Drugstore sites are not only well located and fit within development budgets but also often provide an easier path to secure zoning and operating approvals.

HEALTH CLINICS

That former small town drugstore?

Sometimes it was the only pharmacy operator for miles.

And the drugstore closure removed a vital healthcare resource that was heavily relied upon by area residents.

So one of the best users to step in and fill this void is a local healthcare system.

Healthcare networks—including “one hospital” systems that serve rural areas—have made productive reuse of drugstore buildings as health clinics.

They not only fill the area’s pharmacy needs but also provide urgent care or other services that need not be delivered at the nearby acute care hospital.

That was the case for Memorial Healthcare, an independent provider in Owosso, MI (pop: ~15,000), that repurposed a local Rite Aid for health care use.

Memorial Healthcare operates just a single hospital—the only one in Owosso—but has satellite locations in over a dozen communities to serve both Owosso residents and the ~68,000 people that live in the area.

When the Owosso Rite Aid closed, Memorial Healthcare repurposed the building as a new community pharmacy and urgent care clinic.

Other health care chains have also repurposed vacant drugstore sites in urban, suburban and rural areas as urgent care centers, health clinics and even freestanding emergency rooms.

GROCERY STORES

In the 1960s the average U.S. grocery store was 10,000 - 15,000 square feet, or about the same size as a drugstore building.

While the average size of a conventional U.S. grocery store is now ~50,000 square feet, specialty and niche grocers continue to operate in smaller spaces.

For instance multiple drugstores have been converted into grocery stores by Natural Grocers by Vitamin Cottage, a specialty grocer that primarily sells organic food and produce, vitamins and dietary supplements.

Grocery Outlet, an 'off price' supermarket chain that sells discounted groceries and consumables, has also repurposed drugstores in several markets.

Trader Joe’s is yet another specialty grocer that has made consistent use of repurposed former drugstore buildings.

At least 10% of Trader Joe’s 2025 new store openings were in former drugstores, including a former Rite Aid in Washington state, a Walgreens building in Massachusetts and a pair of vacant CVS drugstores in Pennsylvania.

These drugstore-to-Trader Joe’s conversions have continued into 2026 as well.

In May 2026 Trader Joe’s opened its new Woodinville, WA store in a repurposed former Rite Aid.

Other drugstore buildings have been repurposed as ethnic grocery stores.

At least 1/2 dozen former Rite Aid buildings in the Metro Detroit area have been repurposed as Balkan, Bangladeshi, Middle Eastern, Japanese and Indian specialty markets with more likely on the way.

While conventional grocers specialize in a wide product assortment, ethnic grocers focus on a narrow but deep selection of food and spices.

These product offerings are better suited to a smaller and less expensive store format—like that of a former drugstore building.

And the size, availability and location of former drugstore buildings have made them an ideal real estate fit as specialty grocers and ethnic markets.

That would be the Costco club in Juneau, Alaska which, at just 78,000 square feet, is the smallest Costco in the U.S.

But a recent change in the Juneau club’s policy is making it more difficult and expensive for its members to purchase and receive products.

These days the average size of a Costco Warehouse club size is approaching ~150,000 square feet.

Some are even larger:

One Costco club in Salt Lake City is 235,000 square feet.

And Costco just secured approvals this past May to build a ~220,000 square foot club in Fresno, CA.

But no Costco is smaller than its club in Juneau, Alaska.

At just 78,000 square feet it is the smallest Costco in the U.S.

The Juneau club stocks ~80% of the ~3,800 product varieties found at a typical Costco.

But this smaller Costco club does not include many customer favorites like rotisserie chicken, fresh pizza, a bakery or an on-site gas station.

It does, however, feature a product selection tailored to the local community.

Like more frozen foods for members to get through the long winter, area favorites like reindeer sausage and local necessities such as bear spray.

When the Juneau club was built in 1993, it was part of a test by Costco of smaller club sizes in small and rural communities.

Other similarly sized small format clubs were also built in Washington and Oregon.

But Costco has since expanded or relocated these other small clubs leaving Juneau as by far the smallest Costco club in the U.S.

Of course the club may be intentionally small due to logistical challenges to reach Juneau.

After all there are no roads into or out of town.

Juneau, home to the Alaska state capital and ~30,000 residents, is the largest community in North America not connected to a highway system.

Instead Juneau is served by The Alaska Marine Highway Ferry System, a 3,500 mile marine ferry network that connects over 30 coastal and island communities throughout the state.

But the Costco in Juneau has long been a critical lifeline for far flung and isolated communities in Southeast Alaska.

And the de facto warehouse and distribution service for businesses operated by many rural Alaskans.

In fact for years the Costco club in Juneau has offered a specialized “bush delivery” service.

Businesses in small coastal and island communities near to Juneau could order mixed-item pallets of various products assembled by Costco employees that were shipped via ferry or barge directly to their towns to be resold by local merchants.

But last month Costco ended this specialized shipping service citing “physical limitations and staffing.”

Now only full-size pallets of individual products can be shipped directly from the club to area communities.

That means businesses and residents in these outlying areas must now find other ways to source products.

Like by flying or taking a ferry to the Juneau club to tote back suitcases full of desired items.

Which is likely to result in higher prices and a less regular supply of products for residents of rural and outlying Southeast Alaskan communities.

In a space vacated by a competitor.

After all the real estate is a "known" destination for the product or service.

Plus the space is already built out for the desired use—and likely has other attributes that make for a relatively quick and inexpensive conversion.

That all being the case, the location of the first Dutch Bros site in Seattle should not come as a surprise:

It will be in a space previously occupied by Starbucks.

The new Dutch Bros will backfill an endcap suite that Starbucks had occupied in a strip mall located in Seattle’s SoDo neighborhood.

Starbucks had closed the store in September 2025 as part of a mass closure event that impacted over of its 400 domestic locations.

But Dutch Bros quickly leased the former Starbucks space and is repurposing it for its own use with plans to open later this year.

One other interesting thing about the site?

It is located just 1 mile south of the Starbucks Center—the coffeehouse chain’s global headquarters in Seattle.

The former Starbucks was already built out as a drive thru coffee shop—but Dutch Bros is putting its own touches on the space.

Dutch Bros is upgrading the plumbing, mechanical and electrical systems in the ~1,750 square foot suite.

It also plans to remove the public restroom and convert the dining area into a ~290 square foot “quick transition” area for customers that want to walk-in and pick up drinks rather than be served via the drive thru window.

The drive thru, however, will be the principal mode of transaction activity.

The site already has stacking for up to 16 vehicles in the drive thru area.

Instead of utilizing a speaker box, Dutch Bros will implement a “runner” system in which its employees go vehicle-to-vehicle to take orders and process payment.

The orders are transmitted via handheld devices to in-store production bars where they are prepared for customers to pick up at the service window.

This process is designed to minimize noise, decrease vehicle idling and speed up the order-to-pick up time.

Dutch Bros estimates that the conversion of the former Starbucks will cost just ~$125,000 and be completed within months.

That is just a fraction of the time—and cost—to complete and open its standard ~900 square foot prototype building.

Oregon-based Dutch Bros operates ~1,250 shops in 26 states including more than 70 in Washington state.

But the repurpose of this former Starbucks site will be the first Dutch Bros store in Starbucks’ hometown of Seattle.

Still Dutch Bros is growing fast with plans to open ~180 new shops in 2026 alone and eventually grow to ~4,000 sites nationwide.

So could additional Starbucks-to-Dutch Bros conversions also be on tap?

Perhaps.

After all while Starbucks plans to open at least 150 new stores in 2026 it did close 400 locations in 2025 including 10 which were in Seattle.

Additionally, while Dutch Bros has relied on new ground up construction for the vast majority of its sites, it has selectively turned to adaptive reuse and the repurpose of 2nd generation space to open other stores.

Like other growing companies, Dutch Bros has been plagued by high construction costs, permitting delays and the significant company resources required to build new ground-up prototype shops on leased land.

Dutch Bros CEO Christine Barone even noted that 2024 “could be the high watermark for…ground leases, which is the most expensive way for us to spend money to get a shop out of the ground.”

So Dutch Bros may rely more heavily on other real estate options to add new sites.

Such as backfilling 2nd generation space vacated by competitors like Starbucks.

Or even via the adaptive reuse of other types of buildings.

In fact Dutch Bros has already opened a handful of new sites in repurposed former banks, freestanding QSRs and even casual dining restaurants.

One feature that all Dutch Bros sites are likely to include?

A drive thru.

~90% of Dutch Bros business is generated via the drive-thru and it is a “must have” real estate in new shops.

The drive thru is integral to Dutch Bros and a key reason why Dutch Bros generates average unit volumes of ~$2 MM—even higher than Starbucks.

Still Dutch Bros may need to even go beyond new development and adaptive reuse to source real estate for its next 1,000 shops.

After all unless Starbucks closes several hundred additional sites there may be a limited number of 2nd generation backfill opportunities.

But Dutch Bros is keeping all its real estate options open.

Earlier this year the Company took yet another path to source real estate:

In January 2026 Dutch Bros completed its first ever acquisition by acquiring the 20-unit, North Carolina-based Clutch Coffee chain for ~$20 MM.

Dutch Bros repurposed most of the former Clutch Coffee shops within just a few months.

These will be 2 of at least 8 large format stores that Wayfair will be operating by the end of 2027.

The stores will sell furniture, housewares, appliances, mattresses and décor as well as provide an increasingly popular feature offered by many retailers:

A restaurant.

All large format Wayfair stores include The Porch, a cafe that offers all day food and drinks as well as a place for customers to recharge.

Wayfair is just one of many retailers that also operate restaurants.

Grocers and mass merchandisers like Kroger, Costco and Target have long operated cafes and food courts within their stores.

But in recent years specialty retailers such as Barnes & Noble and RH have also opened full service restaurants.

Pairing stores and restaurants is not a new phenomenon in the retail world.

Department stores in earlier retail eras operated in-house restaurants primarily to drive shoppers to stores and keep them there for longer periods of time.

The difference today is that many retailers are making restaurants a focal part of their business models.

Some retailers are even acquiring existing restaurant chains or opening standalone restaurants that are not within or adjacent to their retail stores.

So why are so many retail chains adding restaurants—and how might it impact their real estate decisions?

Barnes & Noble Was An Early Adopter Of In-Store Cafes—But Full Service Dining May Be A Bridge Too Far

Barnes & Noble was one of the first Big Box specialty retailers to open in-store coffee shops.

The first Barnes & Noble cafe opened in Springfield, NJ in 1993.

Since then cafes that serve coffee and light snacks have been included in nearly all of the bookseller’s Big Box stores.

Barnes & Noble even entered into a licensing arrangement with Starbucks that permits it to sell certain Starbucks products as well as display its logo.

But in 2016 Barnes & Noble began opening even larger dining areas at select stores.

These new Barnes & Noble Kitchen locations are upscale casual American restaurants that offer food, beer and wine in spaces as large as 10,000 square feet.

Barnes & Noble has revealed little about the performance of its full service restaurants—but they may no longer be part of the Company’s future.

At one time Barnes & Noble had operated as many as 5 restaurants but now has just 2 locations.

Also none of the ~150 new bookstores that Barnes & Noble has opened over the past 3 years includes a full service restaurant.

Still Barnes & Noble is not abandoning food and drink sales entirely:

Nearly all recently opened Barnes & Noble stores still feature an in-store cafe.

RH Is Leaning Into Restaurants And May Open Standalone Sites

While Barnes & Noble appears to be heading away from operating full service restaurants, luxury home furnishings retailer RH is moving in the opposite direction.

RH currently operates ~30 restaurants—twice as many as it did just 5 years ago.

Dining rooms occupy a full floor—usually 5,000 - 8,000 square feet—in many RH galleries.

RH’s newest gallery in London’s Mayfair district even offers multiple restaurants as well as a tea salon, wine bar and lounge across two floors!

RH is investing to make restaurants a prominent draw in their own right with “instagrammable” settings that resemble skylit gardens and rooftop parks.

Restaurants are a key feature in most recently opened RH galleries in large cities like London and Paris as well as smaller markets like Raleigh and Oklahoma City.

It is unclear how much sales and profit that restaurants generate for RH.

But RH CEO Gary Friedman noted in 2022 that its average restaurant sales volume was “approaching $10 million annually, and a very profitable four-wall model, we are making significant investments to build a world-class hospitality organization and see endless opportunities to elevate and activate our places and spaces.”

So it is likely that RH will continue to open restaurants.

Perhaps even in spaces other than its galleries.

Wayfair Embraces The In-Store Cafe Concept

Wayfair may be new to brick-and-mortar retail but it is growing fast.

The online home goods retailers is adding several new large format retail stores and all are expected to include The Porch, a cafe that offers a variety of beverages, baked goods and made-to-order sandwiches with indoor and patio seating.

Wayfair is adding stores because they bring in new customers and drive sales.

In 2024 the Company opened its first large format store in a ~150,000 square foot former Carson Pirie Scott mall anchor space in the Chicago-area.

That store appears to be have been smashing success for Wayfair.

Over 720,000 people visited the Chicago store in its first year of operation and 50% of customers that made a purchase were new to the Wayfair brand.

Plus in the year after the store’s opening Wayfair’s sales in the state of Illinois exceeded its national average by 15%.

Wayfair customers at its Chicago store may also have enjoyed The Porch Cafe.

The fast casual restaurant was included in Wayfair’s recently opened large format store in Atlanta and is slated to be a key part of its other stores that are in development in Florida, Ohio and New Jersey.

Other Retailers Are Also Adding Restaurants

Many other retailers also operate in-house restaurants and cafes, from luxury jewelers and apparel shops to Big Box and general merchandise retailers.

• Tiffany & Co. operates the Blue Box Cafe by Daniel Boulud at its 5th Avenue flagship store in New York and last year opened Blue Box cafes at stores in Japan and Hong Kong

• Urban Outfitters parent company has owned and operated multiple restaurant and cafe concepts for more than a decade and currently has a dozen restaurants, cafes and pizzerias

• Coach operates cafes in at least 1/2 dozen of its outlet stores and plans to open 12 to 15 each year in large part to attract Gen Z shoppers to its stores; it notes that the cafes have been profitable in their own right—and that stores with cafes have seen double or triple-digit sales increases.

• Casual lifestyle retailer Tommy Bahama operates over a dozen restaurants and “Marlin Bars” throughout the U.S.; its stores with restaurants perform 2-3x times better than stores that do not have restaurants

Restaurants are big business at general merchandise retailers as well:

Nearly every Costco has a limited—but popular—menu that generates $4 BB in annual sales.

And Swedish meatballs are the iconic dish at IKEA where restaurants comprise ~5% of the Company’s annual revenue.

What Real Estate Might Restaurant-Operating Retailers Pursue?

Retailers are operating restaurants to build brand awareness, attract new customers and keep shoppers in-store longer.

So what real estate might work best for retailers seeking sites for new stores—and restaurants?

Drugstore-To-Bookstore With Room For A Coffee Shop and Drive Thru

Barnes & Noble may be moving away from operating full service restaurants but in-store coffee shops continue to be a part of nearly all of its new stores.

That may make former drugstore buildings an ideal fit for the bookseller.

After all drugstore buildings are typically in good locations and squarely in the size range of Barnes & Noble’s newest stores.

There is also plenty of availability as ~3,000 drugstores have closed over just the past few years.

Plus these former drugstore properties can easily accommodate an in-house cafe—and even a drive thru!

Perhaps RH Will Open Standalone Restaurants In Luxury Hotels

RH may only ultimately build ~100 galleries.

But it may choose to add “standalone” restaurants away from its galleries to build brand awareness and attract new customers.

One option:

RH could partner with a luxury hotel brand to open onsite restaurants (and perhaps even furnishings within the hotel?)

After all, RH is already exploring a similar concept on its own.

It opened and now operates RH Guesthouse, a 10 room ultra-luxury hotel and dining experience in New York City.

Will Wayfair’s The Porch Fill 2nd Generation Fast Casual Restaurant Spaces?

Wayfair has already demonstrated that large format physical retail stores bring in new customers and even lead to increased online sales in the area.

But there will be a limit to the number of large format stores that Wayfair opens.

However the expansion of The Porch Cafe as a standalone concept could provide many more access points, particularly in markets that cannot support a store.

Plus there is likely ample availability of 2nd generation restaurants and coffee shop spaces in dense, high traffic areas where Wayfair is eager to expand its reach.

Ultimately one thing appears to be clear:

Expect many more retailers to make restaurants a key part of their new store projects.

Even it requires them to be “creative” in their pursuit and use of real estate!

The bankruptcy and liquidation of Babies R Us was next.

In 2018 the baby products retailer closed its 233 Big Box stores and the 200+ stores that it operated alongside its parent company Toys R Us.

These closures removed over 10 MM square feet of baby products selling space from the market.

Gymboree then filed for bankruptcy again in 2019.

This time its remaining 900 stores were permanently vacated.

Then in 2023 all 120 buybuyBaby stores—which totaled over 3 MM square feet—closed when its parent company Bed Bath & Beyond filed for bankruptcy.

Even attempts to save some of buybuyBaby’s store footprint did not work.

Baby furniture manufacturer Dream on Me acquired buybuyBaby’s intellectual property and 11 of its leases during the bankruptcy process.

But Dream On Me’s experiment with retail stores was short-lived.

It closed all 11 remaining buybuyBaby stores less than a year later.

Even baby and children’s clothing retailers Carters and The Children’s Place have trimmed their store counts by ~10% and ~50%, respectively, since 2018.

The result?

Over 5,000 baby stores have closed—and 20 MM+ square feet of real estate dedicated to baby and children’s products was vacated—over the past decade.

Quite a bit of revenue had flowed through this real estate:

In the year prior to their bankruptcies Gymboree, Babies R Us and buybuyBaby had each generated over $1 BB in annual revenue.

So where have all these brick-and-mortar sales of baby products gone?

Did they simply move online to Amazon and other e-commerce companies?

Was the market share absorbed by other brick-and-mortar retailers?

Or have some of these sales gone away entirely?

A Shift Online—And To Other Brick-And-Mortar Retailers

The immediate reaction might be that most baby products sales just moved from brick-and-mortar retailers to Amazon and other e-commerce companies. 

Online sales of baby and children’s apparel and products did explode following the Gymboree and Babies R Us bankruptcies and store closures, increasing from $7.5 BB in 2018 to nearly $14 BB in 2024 according to IBISWorld. 

But the growth in online baby products sales has moderated in recent years and was forecast to increase only 2.5% in 2025.

Another thought is that a significant amount of baby products market share was absorbed by other brick-and-mortar retailers.

Like mass merchandisers such as Walmart and Target.

But while Walmart and Target have undoubtedly absorbed some brick-and-mortar baby products sales and market share, they have done so without adding a significant number of net new stores or square footage. 

Another possibility is that other brick-and-mortar retailers have added—or expanded— baby products divisions to capture additional market share.

In fact a significant amount of sales has long occurred outside of baby products stores and mass merchandisers.

A 2018 study by TABS Analytics noted that the “Big 4” of the baby products industry at that time—Walmart, Target, Amazon and Babies R Us—accounted for only about 1/2 of industry transactions. 

The other 1/2 of sales took place at niche online companies and other brick-and-mortar retailers.

Like dollar stores, warehouse clubs and, especially, off-price retailers like TJ Maxx, Ross Stores, Burlington and Ollie’s Bargain Outlet.

Off-Price Retailers Expand—In Part By Taking Baby Store Real Estate

It just so happens that off-price retailers aggressively added new stores during the period of mass baby store closures.

And many of these new stores are even in the same real estate vacated by many former baby products retailers.

For instance, Burlington opened over 50 new stores in former Babies R Us sites and also acquired multiple buybuyBaby leases to backfill the real estate.

Ollie’s Bargain Outlet opened ~40 stores in sites vacated by Toys R Us and Babies R Us and these sites now make up ~6% of the discount retailer’s store base.

TJ Maxx and Ross Stores have also each added dozens of new stores in 2nd generation real estate where baby products were previously sold.

While these off-price retailers do not break out their exact percentage of baby products sales, it stands to reason that they have been among the biggest market share beneficiaries in recent years.

In part by opening new stores in the same former baby store Big Box real estate where sales had been generated for years—even decades!

To be sure, there are other factors that may explain why so many baby products retailers failed—and why industry sales are not growing as fast as they once did.

Like changes in demographics—specifically the falling U.S. birth rate.

The U.S. fertility rate reached an historic low in 2024 with a rate of 1.6 births per U.S. woman, substantially below the 2.1 replacement level.

And this trend is getting even worse:

Data from the CDC shows that the U.S. recorded 3.6 MM births in 2025, a 0.6% decline from 2024 and ~710,000 fewer babies than were born in 2007.

Whether due to economic challenges, cultural influences or changing family structures there are likely to be fewer U.S. births in the coming years.

Lower births almost certainly means less demand for baby products—and, of course, fewer baby-focused Big Box and specialty brick-and-mortar stores.

The bottom line?

Many factors contributed to the closure of 5,000+ baby stores over the past decade.

And while some of these baby products sales shifted online or were absorbed by mass merchandisers and off price retailers one thing appears to be clear:

Brick-and-mortar baby products stores are not likely to ever come back at scale.