Conn’s Closures Leave Behind A Swath Of Empty Retail, Industrial Space In Texas

The Chapter 11 bankruptcy of Conn’s Inc. could pack a stronger punch for commercial real estate than what initially meets the eye, leaving millions of square feet empty across Texas.

The furniture, electronics and appliances retailer headquartered in The Woodlands plans to close all 174 Conn’s HomePlus Stores, as well as about 380 Badcock Home Furniture stores, after filing for bankruptcy in July. The brand also occupies close to 4M SF of industrial space, according to Partners Real Estate data. 

The company has already announced a combined 267 layoffs across four Worker Adjustment and Retraining Notification Act notices filed in the state, impacting call center and industrial facilities in The Woodlands, San Antonio, Beaumont and Grand Prairie. 

And where Texas has been largely unaffected by restaurant chains like Red Lobster and Buca di Beppo closing numerous locations, Conn’s has a large concentration of operations in the state, said Steve Triolet, senior vice president of research and market forecasting at Partners.

“Usually, underperforming [locations] are not in Texas,” Triolet said. “They’re throughout parts of the country where demographics aren’t as good, where they don’t have population growth and all of that. This one is a little bit unique in that it is going to impact Texas a little bit more strongly than most other states.” 

Including its office, industrial and retail stores, Conn’s has 83 locations in Texas, Partners data shows. Conn’s also occupies 51K SF of office space at 2445 Technology Forest Blvd. in The Woodlands, which is listed as available for sublease, Triolet said.

Its largest property, at 657K SF, is in the same metropolitan area. The building at 1401 Rankin Road in Houston contains a clearance center, a distribution center and a corporate office. Conn’s opened that location in 2019. 

The brand also occupies relatively new, high-quality space, including 443K SF at 2051 MacArthur Blvd. in Grand Prairie. The Class-A industrial facility is less than 2 years old, Triolet said.

Conn’s business model relied heavily on people financing merchandise, meaning it suffered more from high interest rates than typical retail stores, Triolet said. 

Conn’s vacating these spaces won't necessarily lead to “doom and gloom,” Triolet said. Texas has enjoyed stronger industrial demand than the rest of the country for several years. The state’s absorption as a percent of inventory through 2022 was 3.5%, compared to 0.1% nationally. 

The retail market is also strong in Texas and nationally, with vacancy at only 2.6% in the first quarter across the country. The low vacancy comes as retail construction has also dwindled over the past couple of years, according to JLL. Where there is new construction, about 75% of it is preleased.

This means Conn’s closure could give retail landlords the opportunity to lease to new tenants and raise rents, like Houston landlords saw in the wake of the 99 Cents Only Stores bankruptcy. But Conn’s has a bigger floor plate than most retail users are looking for, Triolet said.

Its retail locations range from about 5K to 77K SF, according to Partners data. Floor plates could be split to accommodate multiple tenants, but the shuttering of so many locations could also trigger a domino effect for smaller tenants to leave a retail development left suddenly without an anchor, Triolet said.

“I wouldn’t call it a red flag for the retail market,” he said. “Maybe it’s a little bit of a yellow flag since we’re seeing so many of these announcements across the country. But overall, the market fundamentals are strong, especially for all the Texas markets, but really, in all of the Sun Belt.”