Bloomberg News reports that vacancies are rising fast. It notes that the average vacancy rate at neighborhood and community malls rose to 8.2%, up from 7.3% in 2007 and the highest level since 1995. And at regional and super-regional malls, vacancies increased to 6.3%, up from 5.6 % in 2007.
Sam Chandan, chief economist of research firm, Reis Inc., told Bloomberg that the amount of retail space being abandoned, "consistent with store closures, is at its highest level in almost 28 years." What's going on? Retailers --such as Linens 'n Things, Sharper Image, Lillian Vernon, Bombay and Levitz Furniture -- have filed for bankruptcy.
Why so many bankruptcies? It could be that with housing prices down 15% and 3 million mortgages in foreclosure people can't borrow the money they formerly used to purchase the goods that these malls sell. With consumer demand dropping and vacancies on the rise, it's surprising that rents are increasing at all.
But they are -- only more slowly. For example, the growth in rents at neighborhood and community shopping centers dropped to 0.4% in the second quarter from 0.5% in the first quarter and 0.8% a year earlier.
Given the economic headwinds facing consumers and the housing market, it would not surprise me to see more retail bankruptcies and mall vacancies over the next several years. The problems facing consumers took a long time to develop and they'll take at least as long to solve.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.
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Reader Comments (Page 1 of 1)
7-07-2008 @ 11:49AM
Sarah said...
It was a long time coming, but it is finally here. Welcome to the begining of the end my friends. I have been telling people for years, that unchecked growth and profits before all other things would lead to a situation like this. Expect to see a lot more business you took for granted go away.
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My city has lost Linens-n-things, Krispy Kreme and several newer food chains such as Pickip Stix. And at least 4 Starbucks will be closing.
7-07-2008 @ 11:57AM
Sarah said...
Also as an added note: Earlier this year I saw CompUSA (who bought The Good Guys) close leaving us with only Best Buy and Circuit City. Our big Super Kmart seems to be following in CompUSA's footsteps, after buying Sears, they seem to be on the brink of collapse. Additionally, all our local toy stores went under because of price wars between Wal-Mart and Toys-R-Us, but now neither has any good selection and Toys-R-Us seems to be struggling and will likely close if things don't improve soon.
7-07-2008 @ 2:10PM
Bill In Illinois said...
Welcome to the republican economy people! 4 Years ago, I told anyone who would listen that Bush's economic policies would produce this exact result. They all told me I was crazy, that the massive deficits would be the magic elixer for our economy, and that the economy would be unstoppable because of the tax cuts for just the wealthy. Well, I planned according to what I said, they didn't, and now they're the ones in dire straights, and I'm prepared for the Extreme Depression (as this era will come to known), I just hope I can withstand it, but republi-morons will propably steal all my money before that happens...
7-07-2008 @ 5:02PM
Mike said...
Retail closings and mall vacancies are up from last year to their highest levels since the Carter administration.
vacancy rate at neighborhood and community malls rose to 8.2%, up from 7.3% in 2007 and the highest level since 1995
Lets see, highest since Carter. Highest since 1995. Oh wait. Who was President then.
All these chains and malls with problems are weak sisters and almost anything would push them over the edge.