Undervalued Retail Assets in the Furniture Sector: Opportunities Amidst Store Closures

The furniture retail sector has undergone a seismic shift from 2024 to 2025, marked by a wave of store closures and bankruptcies. Major players such as Metro Mattress, American Signature Furniture, and Conn's HomePlus have succumbed to economic pressures, leaving behind a trail of vacant commercial properties, discounted inventory, and expiring leases. For investors, these developments represent a paradox: a crisis for retailers, but a goldmine for those who can identify undervalued assets and repurpose them effectively.

The Catalysts for Retail Distress

The collapse of these retailers is not an isolated phenomenon but part of a broader industry-wide struggle. Rising labor and product costs, inflation, and tariffs have eroded profit margins, while shifting consumer preferences toward online shopping have further strained brick-and-mortar models. According to a Newsweek compilation of Coresight data, over 7,100 retail closures were recorded by November 2024, a 69% increase compared to 2023. The furniture sector, in particular, has been hard-hit, with companies like Metro Mattress filing for Chapter 11 bankruptcy in September 2024 and liquidating all 69 stores by early 2025, as reported by TheStreet.

Undervalued Assets: Real Estate, Inventory, and Leases

The closures have left behind a significant amount of commercial real estate, much of which is in prime locations. For example, Metro Mattress's bankruptcy process involved consolidating inventory into five to six stores for a going-out-of-business sale before vacating all locations, according to Fast Company. This creates opportunities for developers to reposition these spaces. Similarly, American Signature Furniture's strategic restructuring-closing four Nashville-area stores-reflects a focus on top-performing regions, leaving underutilized properties in other markets, as noted by TheStreet.

Investors can capitalize on these assets in three key ways:
1. Real Estate Repurposing: Vacant retail spaces, particularly in malls and strip centers, are being transformed into mixed-use developments, healthcare facilities, or logistics hubs. For instance, the Rivergate Mall in Nashville is being redeveloped into a mixed-use complex featuring housing and medical facilities, according to NAR case studies.
2. Inventory Liquidation: Distressed retailers often sell off inventory at steep discounts. In 2024, Surya acquired the Mitchell Gold + Bob Williams brand's inventory and intellectual property, relaunching it as a niche player, as reported by TheStreet.
3. Lease Acquisitions: Strategic buyers are snapping up expiring leases. A notable example is Burlington, which acquired 15 Conn's HomePlus retail leases in October 2024 for $6.65 million, expanding its footprint in Texas and other regions, according to The Real Deal.

Risks and Rewards

While the opportunities are compelling, investors must navigate risks. The retail vacancy rate remains low at 4.7%, meaning competition for quality spaces is fierce, according to JLL. Additionally, lease terms for closed stores often include clauses like default penalties or surrender-of-premises requirements, which can complicate acquisitions, as outlined on LeaseRef. For example, Metro Mattress's bankruptcy filing included provisions for landlords to reclaim properties in "broom-clean" condition, adding to the logistical burden, according to Furniture Today.

However, the rewards for those who act swiftly are substantial. The National Association of Realtors highlights case studies where vacant malls were redeveloped into tech hubs or community centers, generating long-term value. Similarly, Hilco Global's management of 99 Cents Only Stores' bankruptcy generated $168.5 million in real estate proceeds within 75 days, demonstrating the potential for rapid returns in distressed retail environments.

The Path Forward

For investors, the key lies in agility and sector-specific expertise. Niche asset managers and private equity firms are already leveraging their knowledge to identify undervalued furniture retailer assets. As of Q2 2025, the U.S. retail market has seen a surge in demand for well-located properties, particularly in growth markets like Phoenix and Dallas, according to CBRE. These regions, with their expanding populations and job markets, offer fertile ground for repurposed retail assets.

Conclusion

The furniture retail sector's turmoil has created a unique inflection point for value investors. By targeting undervalued real estate, inventory, and leases from closed retailers, investors can not only mitigate the risks of a volatile market but also position themselves to benefit from the sector's eventual recovery. As the industry adapts to hybrid work environments and evolving consumer preferences, those who act decisively will find themselves at the forefront of a transformative era.