Toys R Us is Gone, But What Happens to the Value of Former Toys R Us Locations?

Many Americans remember personal experiences at Toys R Us, and the news in 2018 that the toy giant was ultimately closing its doors triggered nostalgia for the landmark toy store. But nostalgia and consumer experience aside, the closing of Toys R Us and liquidation of its assets has larger market and economic impacts. For example, what happens to the value of former Toys R Us locations?

Reports indicate that after Toys R Us closes its doors on June 30, there will be more than 700 empty stores across the United States, most concentrated in the Northeast, California, and Florida. While many former locations are in desirable real estate markets, the value of these properties will undoubtedly change- and in most cases, decrease.

While some Toys R Us locations may become occupied by other retailers, it’s unlikely that any new occupancy will occur at least for several months, which lends itself to the assumption that vacancy rates for these properties will be notably higher in the later months of 2018 than former years. Vacancy rates are important components of calculating fair market values for income-producing properties like retail stores; and the vacancies of former Toys R Us stores will decrease to some extent the values of those properties. In the alternative, for properties that are not leased, the absence of income combined with vacancy rates will undoubtedly lower fair market values.

One way the owners of former Toys R Us locations in New Hampshire can recoup at least a portion of their lost revenue is to file for property tax abatements on the empty properties. The Toys R Us stores closing in June 2018 were assessed for the taxes for the 2018 year as of April 1, 2018; however, the vacancies and lost revenue that will begin to hit property owners beginning in July 2018 will lend themselves towards adjusting the valuations for the 2019 property tax year (such assessments being based on the condition and facts of the locations as of April 1, 2019).

For more information on commercial tax abatements and obligations, contact Allobar Strategies for details.

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