Store Closings Could Double in 2009 (11/5)
Nov 5, 2008 2:06 PM
With the precipitous decline in consumer spending and the tightening credit, the industry should see a minimum of 10,000 store closings in 2009, says Howard Davidowitz, chairman of Davidowitz & Associates, Inc., a New York City-based retail consulting and investment banking firm. In the first half of next year, ICSC projects, store closing announcements will surpass the 3,100 mark.
With holiday same-store sales growth forecasted to reach, at best, very low single digits, Davidowitz and Lois Huff, senior vice president with TNS Retail Forward, both say there will be a significant number of bankruptcies in the first quarter of 2009. Those chains that are teetering on the edge right now and need strong holiday sales numbers to stay afloat will likely be pushed into bankruptcy.
During the 2008 holiday season, spending on apparel will experience zero percent growth compared with a 1.9 percent increase last year, according to TNS Retail Forward’s projections, while spending on furniture items will fall 2.3 percent compared to a decline of 0.7 percent last year. The luxury sector will feel the pinch as well, though not to the same extent as midmarket retailers, says Davidowitz.
“It’s basically a foregone conclusion that it will be one of the more challenging seasons we’ve seen in many, many years,” says Al Williams, principal with Excess Space Retail Services, Inc., a Huntington Beach, Calif.-based real estate disposition and restructuring firm. “Consumer spending has been down; if anything, by December, it could be slightly worse.”
Excess Space estimates the number of store closings for all of 2009 could increase 100 percent compared to this year, ranging from 12,000 to 14,000 stores. Chains that rely on discretionary spending, including apparel sellers, furniture stores, jewelers and restaurant operators, will be hardest hit, according to Graiser.
This will be a particular concern for owners of class-B properties in secondary markets, which will experience the brunt of the closings, says Bernard J. Haddigan, managing director of the national retail group with Marcus & Millichap Real Estate Investment Services, an Encino, Calif.-based brokerage firm. If those centers face debt maturities next year, the owners might be forced to put in more equity into refinancing transactions to make up for rent shortfalls.
But lenders will likely try their best to help owners keep occupancy levels up, says Graiser. “The lenders are not going to want to see these properties come back to them.”
--Elaine Misonzhnik
