Starbucks abandons some high-profile urban locations around the country

Of the hundreds of locations that Starbucks is closing, many are in high-profile and busy urban areas — prime retail real estate — as a post-pandemic drop in downtown foot traffic, competition from upstart rivals and a growing preference for drive-thru service take their toll on the coffee giant.

Starbucks still hasn’t officially disclosed how many stores it will be shutting and where they are. But after announcing it was trimming down its store fleet by 1%, Starbucks by Friday had posted signs on several hundred of its locations saying they were about to be closed, according to media reports from around the United States and Canada. CoStar News was also able to identify some stores that are closing.

What raised eyebrows in the public, and on social media, was that many of these coffeehouses were seemingly popular stops in their respective cities, places such as the chain’s home in Seattle as well as Los Angeles, Chicago and Atlanta. Nonetheless, Starbucks Chairman and CEO Brian Niccol, in a letter to employees Thursday, said the stores going dark were “unable to create the physical environment our customers and partners expect” and didn’t have “a path to financial performance.” Starbucks didn’t provide any additional comment to CoStar News.

In some ways, Starbucks is facing a perfect storm of problems. Some cities continue to see fewer visits because of remote-work schedules — employees still working from home — and fears about crime and safety, according to several retail analysts. So even some Starbucks in urban central business districts appear to be failing to meet the chain’s targets.

In addition, a bevy of newer chains, such as Dutch Bros., are expanding, are surging in popularity and are focused on drive-thrus. Plus, the soaring prices of Starbucks offerings, with coffee and labor costs rising, don’t appear to be meeting with customer approval. The chain has seen several consecutive quarters of comparable-stores sales decline. Niccol was brought in to turn around the ship.

“Starbucks’ decision to reduce its North American store footprint was likely driven by several factors, including the post-pandemic consumer shift away from urban centers and competition from rapidly expanding drive-thru coffee chains,” R.J. Hottovy, head of analytical research at real estate data firm Placer.ai, said in an email to CoStar News on Friday.

Starbucks’ largest market is California, and most of the closings so far are planned for the state’s most populous region: Los Angeles.

One of the locations headed for a shutdown is a high-profile Hollywood address at 5545 W. Sunset Blvd. The Starbucks’ website lists it as closing next week.

The 1,750-square-foot store is within a food-focused strip in a fast-growing area of East Hollywood, where new homes and apartments are underway. The store is situated across from a new Target-anchored shopping center and several apartment complexes, including a 185-unit project called Ardence & Bloom.

Another outpost slated to close — a 1,541-square-foot store at 257 S. La Cienega Blvd. — is in Beverly Hills, one of the most high-profile locations for retailers globally. That store, however, is in a less-trafficked location, analysts say. A store employee confirmed to CoStar News that Saturday is the shop’s last day of business.

“While they may be underperforming locations for Starbucks, they open up availabilities for the right operator,” Catherine Yeh, director of market analytics for CoStar, said.

About one-third of the Los Angeles stores marked for closing are downtown, where foot traffic has been challenged by pandemic-era remote-work trends and concerns over public safety, according to Yeh. The second biggest concentration of stores marked for closure is on the Wilshire Corridor in Koreatown, where competition from specialty coffee shops is stiff.

“L.A. has historically favored smaller, more local brands like Verve and Go Get Em Tiger,” Yeh said.

One of the stores slated to close as of Sunday, according to the Starbucks website and a store employee, is in Seattle’s Lower Queen Anne district, one of the city’s most exclusive neighborhoods and tourist destinations. The area is a 10-minute walk from the Space Needle and other attractions at Seattle Center.

Retail rents in Lower Queen Anne average $38 per square foot, compared with $30.83 per square foot for the greater Seattle market, according to CoStar data. Rents in the Queen Anne-Magnolia area have increased 3.3% over the past year — greater than the five-year average of 3%, the data shows.

While the rent Starbucks pays for the 1,100-square-foot Lower Queen Anne store was not immediately available, the location is at the base of the upscale Mediterranean Inn, where hotel rooms cost between $270 and $522 per night on weekends, according to the hotel’s website.

A location that has already closed is the Starbucks Reserve Roastery and Tasting Room, opened at 1124 Pike St. on Capitol Hill in 2014 as the flagship for one of the chain’s first showcase destination concepts. Starbucks has since opened roasteries in Chicago; New York City; Milan, Italy; Shanghai; and Tokyo, all of which were still open as of Friday.

The Seattle roastery — along with the nightlife, restaurants and counterculture vibe in the eclectic and densely populated neighborhood just east of downtown — quickly became a draw for international tourists and locals.

A mix of residents, tourists and employees — dressed for work and apparently unaware of the roastery’s abrupt closure — expressed shock Thursday afternoon at the boarded-up windows posted with plaintive signs that “with heavy hearts,” Starbucks had closed the facility.

“This location has been the destination of coffee lovers from down the block and around the world,” the sign read.

Audrius Ruksenas and his wife, Indre, on vacation in Seattle from Cincinnati, showed up for a coffee-tasting appointment Thursday afternoon. To their irritation, they found the facility shuttered.

“They called to confirm the appointment yesterday,” Audrius Ruksenas told CoStar News. “We built our whole day around this. I’m going to write a letter to the CEO and the shareholders. This is not a good look for the company.”

The roastery’s closure is a loss for the neighborhood and for Seattle’s tourism industry, said the couple, both doctors that emigrated from Lithuania to Ohio nearly 30 years ago.

“Nobody comes to Seattle just to go to some coffee shop, but do come here to go to the Starbucks roastery,” Ruksenas said. Capitol Hill is one of just three places in Seattle, along Pike Place Market and Olympic Sculpture Park on the waterfront, that the couple has visited.

“Capitol Hill is very cool, but this is a loss for the neighborhood,” Ruksenas said. “I hope these people get their jobs back and that businesses in the area aren’t hurt too badly. They’re going to lose a lot of traffic.”

Starbucks’ closings include stores at some of Chicago’s busiest intersections. The coffee shop that’s going dark at North and Clybourn avenues is within a Chicago Transit Authority train station serving the Red Line. The North Side train station is adjacent to one of two Apple flagship stores in the city, at the edge of the wealthy Lincoln Park and Old Town neighborhoods.

Other attractions near the Starbucks at 1599 N. Clybourn Ave. include Steppenwolf Theatre, shopping centers such as NewCity and big-box retailers including Crate & Barrel.

About 1½ miles directly west in Wicker Park, a shop along the Damen train station on the CTA’s Blue Line also is closing its doors. That Starbucks is within a building at 1564 N. Damen Ave. that bends along the intersection with North and Milwaukee avenues.

That low-rise structure is near the Robey Chicago hotel, the historic Flat Iron Arts Building, a recently opened Barnes & Noble bookstore inside the historic former Noel State Bank building and rows of other retail along the three high-traffic streets.

Employees at the two shops confirmed Friday the two Chicago stores are ending their runs.

Only a handful of Starbucks’ coffeehouses are slated to be closed in New Jersey, including one at 40 W. Park Place in Morristown. That prominent corner location is in the city’s downtown off the Green — a historical park in the center of town. The area is chock-full of restaurants and bars. A sign on the door says the store is scheduled to close, and an employee confirmed that with CoStar News.

One of the site’s drawbacks may be the fact it doesn’t have a drive-thru and there’s a lack of parking in downtown Morristown, making it hard to run in and grab a drink, according to Neil Goldstein, a principal at real estate firm The Goldstein Group.

If some cases, Starbucks is looking to relocate coffeehouses to other sites where they have room to add drive-thru lanes, according to Goldstein. The chain recently tried to do that in Livingston, New Jersey, but failed to win local approval for its plan, he said.

Starbucks is in the process of seeking municipal approvals in New Jersey for new drive-thru locations in Toms River, Sayreville, Tenafly and Bridgewater, according to Goldstein.

“They’re still expanding, but they’re weeding out their underperformers,” he said.

Starbucks has seen some improvements under Niccol’s helm, according to Hottovy.

“Although macroeconomic uncertainty continues to weigh on comparable visits, there are early signs that [Niccol’s] focus on returning the brand to its coffeehouse roots is working, evidenced by an increase in average visitor dwell time this past August,” he said.