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Surprise Surprise: More Store Closings

February 4, 2010

More store closings are expected. This doesn’t come as much of a surprise. Given the percentage of sales retailers ring up during the holiday season, it was obvious it would have been wise to get through the holiday season and then put the wheels of closure back in action.

Bloomberg has a pretty cool little multimedia presentation on store closures. The methodology in their model might be a bit skewed, but the model predicts that there are 10% too many stores in the US. Obviously this is a macro number that is not reflective of individual markets, but after having done retail deals in markets such as Sacramento and Southern California, it’s easy to see that some areas are simply overbuilt – andĀ over-leasedĀ – as far as retail is concerned.

If you’re a retail investor, it’s probably too early to begin to assume things are turning around and forget about credit quality.

The page is not embeddable, so click here to take a look.

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Categories: Commercial Real Estate Investing | Trends
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Lloyd Hanford, MAI February 4, 2010

Anecdotal evidence suggests that many national retail chains may have canabalized their own markets with competing store openings within or close to the same trade area. Looking forward, it is probable that future, new store site selection will be much more restrained and dependent on a demand model that will convince the chain of success in a selected location. In addition, retailers should be expected to be much tougher negotiators when it comes to rentals and lease terms where willingness to meet a rent will depend on anticipating sales volumes to justify that rent. None of this would be good for the operators of retail properties.

joshua February 5, 2010

that was a neat article. being in so cal and seeing so much of the rampant strip retail building that has happened, we are going to see most of the pain in the strip retail sector. grocery anchored centers seem to be holding up ok and should continue to hold up in comparison.

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