3,000 Centers Could Close Next Year?

We’ve seen that report in two different stories the past two days, and it sure seems like a lot.

The bad news comes from Burt P. Flickinger III, managing director of the Strategic Resource Group, who actually said that the number could be as low as 2,000. Whew. That’s a relief.

He’s also saying in the articles that between 160,000 and 200,000 stores could close next year. Wowee.

We don’t even want to deal with what those store-count numbers mean right now. But if there are between 2,000 and 3,000 center closures next year, it would be like Kimco Realty Corp. completely disappearing. Or Developers Diversified Realty and Regency Centers and Weingarten Realty and more going belly up.

Uh…Happy New Year?

Anyone think these numbers are high, or are they unfortunately on the mark?

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18 Responses to “3,000 Centers Could Close Next Year?”


  1. 1 Steve Slattery December 30, 2008 at 9:16 am

    Because there will be fewer new centers constructed and many which will close, existing strip centers which have existing assumable financing and stable market priced tenants are a bargain. Typically purchased well below replacement cost they are trading at steep discounts.

  2. 2 Jim Farrell December 30, 2008 at 9:26 am

    A typically overblown number, by a media bent on continuing the trend of “confirmation bias”. For those who want a brief explanation of what this term from the psychological field means–and how it’s being applied by the media in the deluge of bad news stories–check out the article this past Sunday in the “Outlook” section of The Washington Post.

    Honestly, I think these “experts” are proffering such outrageously high numbers so when they’re not hit, they can say “well at least I didn’t understate the severity”.

  3. 3 Tim from Atlanta December 30, 2008 at 9:30 am

    Wow, I am seeing all kinds of numbers and I can’t tell which one is accurate. Flickenger says 160,000 will close. Marcus & Millichap says as many as 7,100 store closings are likely this year.

    I can’t tell if this is US only or worldwide. Can anybody shed some light on how many US Retailers store locations are expected to close in 2008 and 2009? Thanks in advance.

  4. 4 Brad Ellman, December 30, 2008 at 9:30 am

    “The United States had twice as much retail selling space than any other industrialized nation at the end of the 1990s. And since then, it’s added 50 percent more selling space to an already over-stored situation. Led by Wal-Mart, the nation’s top eight retailers alone built more than a billion square feet of selling space in the last decade.”

    Donna’s statement above if accurate, is the operant condition.
    Granted, all of us taxpayers are now reluctant partners with the same banks that have bad-loaned us into the poorhouse but:
    How much square footage does this massive closure estimate represent?
    Where is the +50% figure derived from?
    Census reports a 281MM – 305MM (+8%) population increase from 2000-2008. The claim of fifty percent more retail square footage for the same 8 year period is excessive on it’s own.

  5. 5 GetReal December 30, 2008 at 9:59 am

    A report issued last May by CoStar Group indicated that the number of shopping centers with 50,000 square feet or more increased from 85,713 in 2000 to 98,351 in 2007. The amount of leasable area in shopping centers increased from 5.837 billion to 6.755. My math says that this is an increase of less than 16%. Shopping centers over 50,000 SF were said to account for 53.6% of total retail space. This presumably includes very small strip centers and traditional downtowns and neighborhood business districts. So I can’t see how the amount of retail space has grown by 50% since 2000.

  6. 6 Larry Ortega December 30, 2008 at 10:36 am

    Here’s what we know for certain, store closures will increase in 2009 and 2010. I have been active “recycling” retail real estate in the Phoenix market for over 20 years and in the past 10 years have re-tenanted 2,500,000 sf of space. Clearly, some of this space cannot remain retail and we are seeing a conversion to alternate uses. I have certain landlords that resist this change (and with the anchor changing uses it definitley affects the entire center) but a tenant that pays rent is always very enticing. I have worked on some vacant spaces for over 2 years and it wears out not only the broker but the center, the owners and other tenants.

    This cycle (actually not a cycle but a “reset”) will allow all of us to either be more creative or out of business.

  7. 7 kin powell December 30, 2008 at 12:29 pm

    3k properties,if you think up to 600mall sites & 1k of obsolete center locations & 1.5k of 4 tennant slums built this decade, seems like a fair # to me! Actually i hope Bert’s right, because it would rationalize the retail property industry. NO Virginia, KIM,DDR,REG&WRI are not going away–they will thrive inthis enviroment with there acess to capital!

  8. 8 Ron Bild December 30, 2008 at 4:49 pm

    Well If Marcus & Millichap says as many as 7,100 store closings are likely this year that means that, for example, 71 retailers would have to close 100 stores each. Does that seem likely?
    Don’t know what any of these predictions are basing their numbers on.
    That would be interesting to know.

  9. 9 James December 30, 2008 at 4:58 pm

    The old criteria was that 16 to 18 SF of retail per capita represented a fully served market. Many trade areas are over served, and typically in the area of 33 to 38 SF per capita. Some are higher than that. Something has to give. As Warren Buffet famously said ” You don’t know who is swimming naked until the tide goes out”. The tide is out. The big REIT’s are going to experience tremendous exposure to this and I expect them to be overwelmned with anchor vacancies and the parallel failure of co-tenants.
    This comprises a huge hole that no amount of adaptive re-use can fill. The whole market will suffer, the value of a “credit” tenant will be suspect, and cap rates will soar. I wish I could be more optimistic, I viewed REIT’s and the liquidity they brought as the best thing since sliced cheese.

  10. 10 Bill in PA December 30, 2008 at 5:24 pm

    I think that the 3,000 number is actually probably a little on the low side, but fairly accurate. However (and this is important), I do think the strongest will survive. So far, it looks to me that there will be a decimation of an entire category of retailer-I refer to them as the 3s. If, on a scale of 1 to 10, and big box places like Wal-Mart, Family Dollar, etc are between 1 and 2, and Prada, Gucci, etc. are a 10, the greatest victims of this crisis will be those stores that fall into the category of 3s. These retailers sell products (particularly clothing) which aren’t particulary fashionable or of any specific quality, but weren’t stocked by the people wearing blue smocks.

    In the end, there will be some winners and losers. Those all- purpose big-box retailers will thrive in a market like this; so will the club-store companies. Localized winners will be eateries (like the ubiquitous $5.99 all you can eat Chinese buffets) and semi-fast food retailers like Subway and Quiznos. The biggest losers of this will be those non-descript, semi-specialty retailers, as well as at least one (if not more) of the old line Mall Anchor stores (somebody bigger than Boscov’s too).

  11. 11 michael aychental December 31, 2008 at 9:49 am

    As a small space retailer/user in shopping cente s we would take 100 new locations in 2009 if affordable rents for our use and decent exposure in malls became available.I am certain that there are thousands of other chains in the same position

  12. 12 Dunkin'man December 31, 2008 at 2:06 pm

    Just do some quick math:
    154 Circut City Stores 150 Starbucks, 158 Kaybee Toys, Steve & Barry’s, Linen& Things, Rite Aid, Goody’s, Just quick match from the news 30 to 60 days BEFORE the holidays are over!

    568 to 750 stores and over 10,600,000 sq ft

    Once again, BEFORE the sales number from Christmans are posted!

    Not to mention the renegeotiation of rents that may not help in six months

  13. 13 CentersDryingUp December 31, 2008 at 7:13 pm

    Centers don’t close overnight, most of the lease expirations are scattered about in different years. What usually happens, is that spaces vacate, here and there, like a patchwork quilt. The Landlord winds up with a half vacant center and few prospects, under these tight credit conditions. Lenders then write-down the property values, and that’s that.

  14. 14 330firecracker January 3, 2009 at 10:37 pm

    Location, location, location. Companies that have open-air centers in the best locations will retenant and do well. It will take some time, but it will happen. Rents may be pushed down a bit, but not much. Open-air centers have the lowest occupancy costs and are destination driven. Not to mention that security is easier at open-air centers. Occupancy cost is critical. National retailers will continue their migration to open-air centers from the malls at an increasing rate as compared to prior years. DDR, Kimco, Regency, etc will be fine and will come out on top. Enclosed malls will not and will have to re-invent themselves again. My suggestion to mall owners, continue to focus on food, entertainment and community activities. The days of shoppers wondering through malls and spending hours shopping are close to being over.

  15. 15 Jerry Engen January 4, 2009 at 9:29 pm

    ICSC projected the number of store closing in a research paper in July of 2008. Included was a chart indicating the number of store closings since 1993. When you look at the closings in the last recessionary period, the 2008 number seems moderate given the state of the capital markets. I think in order to understand the real impact of the projected number of store and center closings, you need to also see the number of actual store openings and new center openings during the same period.

  16. 16 Broker January 5, 2009 at 10:07 am

    LOL,say it ain’t so. American females not shopping till they drop? The end of the world may actually be near and Al Gore need not fear; hell may be in danger of freezing over this year.

  17. 17 Smfiedler January 6, 2009 at 7:18 am

    Deep discounts will only put a band-aid on the ailing tenants that are teetering after the Holidays. This _________ (r-word) that we have been in, has and will be the force to cleanse the retail industry, with the oversaturation of new malls and retail centers … and those poorly run and over-extended retail chain stores.

    Hold on to your hat, as we may be in for a rocky (but hopefully short) ride over the coming months!

    Like everything in life, it shall be cylical, and retail shall rebound and flourish again.


  1. 1 Terranova Gives Tenants a Hand « Commercial Grove Trackback on January 7, 2009 at 12:33 pm

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