According to Bloomberg, shopping centers across the country are still struggling to fill empty store fronts from retailers who went out of business years ago.
Reis, a company which has analyzed the CRE industry for over 30 years, says that over the last year, vacancies at U.S. regional malls rose from 7.9% to 8% in the fourth quarter. This is due in part to Sears Holdings Corp. store closures. Unfortunately, as more and more national retailers (i.e., RadioShack, J.C. Penny Co., Borders, etc.) close stores, the real estate recovery for neighborhood and community shopping centers will remain extremely slow.
A report by the International Council of Shopping Centers revealed that retailers and restaurateurs planned to close 5,483 locations last year, more than double the 2,592 in 2013. This is the highest number of retail and restaurant closures since 2010.
One issue related to filling space abandoned by larger retailers is that the footprint is too large or specifically customized to be filled by other tenants. However, smaller spaces, including the vacated RadioShack locations, are already being re-let to fast food restaurants, national haircut chains and entertainment retailers.
Despite the insights revealed in the recent Bloomberg article, “Empty Stores Haunt Landlords as More Retailers Plan Cuts,” a report by Jones Lang LaSalle (JLL) claims that some retailers are taking advantage of vacant spaces. “While several major closings were announced early this year, many others are stepping up expansion plans and taking advantage of vacant spaces in strategic locations. The last several years have seen a steady stream of new stores and concepts in the retail space,” stated JLL.
Additionally, according to RBC Capital Markets, “despite claims that e-commerce will overtake traditional retail sales, physical retail space remains not only relevant, but attractive. Retailers plan to open approximately 76,545 stores in the next 24 months.”
As a retail investor, there are many decisions to be made based on today’s current environment.
At Commercial Defeasance, our team has worked with a number of retail owners who have chosen to sell their properties due to the current state of the industry. Others have chosen to refinance their current loans now and hold onto their investments. We provide free consultations on defeasances for both refinances and sales. Give us a call today, so we can discuss your options.