Store closings are on the rise, according to a recently released survey from the International Council of Shopping Centers (ICSC). However, densely populated urban areas will continue to thrive, according to a report from the national real estate investment services firm of Marcus & Millichap.
The first half of 2008 saw announced closings of 2,831 stores, compared with 1,522 announced closings in the first half of 2007. Yet the more recent numbers pale in comparison to 2001, when 7,041 store closings were announced.
Not surprisingly, apparel stores represented 34.7 percent of this year's first half announced closings. They were followed by home entertainment stores at 28.8 percent. ICSC projects that 144,000 establishments will be closed in 2008, a seven percent increase over 2007.
A recent spate of retail bankruptcies, which include Boscov's and Steve and Barry's, should not be a major cause for alarm, say retail experts. "Store bankruptcies are going to increase, but that doesn't necessarily lead to store closings," said Bernard J. Haddigan, managing director of Marcus & Millichap, Atlanta. Still, expect more closings, Haddigan warned. "The food industry is softening, and small shop space is virtually dead," Haddigan said.
More telling is where shops are staying open. Densely populated urban areas are doing well, as people seek to cut back on the cost and inconvenience of driving. "There's a larger trend with the District of Columbia and Atlanta," he concluded. "People are tired of the long commutes and are moving to the urban core."
At mid year 2008, according to Marcus & Millichap, Washington, D.C. had a retail vacancy rate of 4.7 percent, well below the U.S. average. It was topped only by San Diego's 3.6 percent retail vacancy. Philadelphia's retail posted a 6.9 percent vacancy. Meanwhile, sunbelt cities such as Orlando, Dallas/Fort Worth and Chicago, fared less well at 9.5 percent, 15.1 percent, and 9.5 percent, respectively.
A comeback likely won't occur until 2010 or 2011, Haddigan predicted.
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