Store Owners Seeking Space Wait for Retailers to Die
Retailers planning to open stores this year may have difficulty finding space in the most desirable malls and shopping centers, industry executives said.
“For those of us who want to grow and have new stores, we’re having a very hard time finding the right locations,” Richard Baker, chief executive officer of NRDC Equity Partners LLC, the Purchase, New York-based owner of Lord & Taylor, said yesterday during a panel discussion at Bloomberg’s New York offices. “We wait for other retailers to die and hope that we can take their space.”
Retailers are expanding again after store closings during the recession created record vacancy rates, said Sandeep Mathrani, executive vice president of the retail real estate division at New York-based Vornado Realty Trust. Thirty-seven percent of retailers plan to increase their store count this year compared with 21 percent who expect to contract, according to the National Retail Federation.
“We are starting to see tenants looking for space,” Mathrani said. “Phones are ringing.”
Vacancies at the largest U.S. shopping centers reached a record 8.9 percent in the first quarter, according to real estate research firm Reis Inc. The rate was the highest since 2000, when New York-based Reis began tracking the data. The rate at smaller neighborhood and community centers increased to 10.8 percent, the highest level since 1991.
The real estate executives said the market is now recovering from the bankruptcies of chains such as Circuit City Stores Inc. and Linens ‘n Things Inc. in 2008 and 2009. NRDC’s Baker, who also serves as executive chairman of Retail Opportunity Investments Corp., said his company wants to buy $1 billion of strip shopping centers on the east and west coasts. “It’s a dynamite time to get good value,” he said in an interview with Bloomberg Television. “We think we’re banging along the bottom in the cycle, and that properties we acquire over the next 18 months will be very valuable over the next five years.”
Vornado’s occupancy rate is more than 92 percent, helped by its focus on the U.S. Northeast, which has less retail space per person, Mathrani said. Milton Cooper, chairman and co-founder of Kimco Realty Corp., said his company was at 92.5 percent occupancy.
“The good property is always going to be good and tenants want to be in it,” Baker said at the panel. Retail Opportunity Investments has a 96 percent occupancy rate for its retail spaces, he said.
The vacancy rate will decline as the market absorbs the excess supply from the bankruptcies and the U.S. population expands, said Cooper, whose New Hyde Park, New York-based company is the largest U.S. owner of community shopping centers.
Kimco’s properties have high occupancies because its tenants focus on selling necessities, he said.
“There have been very few new department stores built in America,” Cooper said in a Bloomberg Television interview. “I don’t think there’s been three opened in the last three years. Yet you have new supermarkets, new drugstores, new discounters, new warehouse clubs.”
Consumer spending has improved this year. Retail sales increased 1.6 percent last month, the biggest gain in four months, according the Commerce Department. The National Retail Federation predicts retail sales, excluding cars, gas stations and restaurants, will climb 2.5 percent this year following a 2.5 percent drop in 2009.
“The consumer is coming out of her shell,” said Stephen Sadove, chairman and chief executive officer of New York-based Saks Inc., where sales at stores open at least a year grew 12.7 percent in March.
“They’re coming back, but they’re not coming back in exactly the same way,” he said. “They’re buying one pair of shoes, instead of two.”
To contact the reporter on this story: Matt Townsend in New York at firstname.lastname@example.org