Retailers at risk . . .
Of closing
• Claire's Stores (young-women's accessories )
• Finlay Enterprises (operates Bailey Banks & Biddle jewelry stores)
• Loehmann's (discount apparel and home furnishings)
Of cutting back
Some chains might close less-profitable stores this year:
• Office Depot
• Select Comfort (mattresses)
• Tween Brands to eliminate Limited Too stores in favor of Justice stores
• Williams-Sonoma
Sources: Standard & Poor's, company filings, bankruptcy experts
It's a sign of the times, reflecting the likelihood that the Columbus-based mall developer will lose income when retail tenants close stores this year.
Some experts say that the number of store closings in 2009 will be the most in 35 years, affecting every sector from apparel to electronics.
"You know someone's not going to be around as a retailer," said Glimcher Realty Chairman and Chief Executive Michael P. Glimcher. "We don't know exactly who it is. Someone's going to surprise us negatively."
This year promises to be full of surprises for nearly everyone associated with the retail industry, from the chains themselves and warehouse operators, to shopping-center owners and real-estate brokers. And shoppers who are still willing to spend in this listless economy might see several of their favorite stores go under.
In the past six months, chains including Circuit City, Value City Department Stores, Goody's Clothing and KB Toys have declared bankruptcy. On Friday, Circuit City became the latest to announce liquidation plans after it failed to find a buyer or arrange needed financing.
Several department-store anchors, including Sears, are on analysts' watch list. Further, the credit crunch has made it much more difficult for ailing companies to raise the money needed to reorganize and emerge from bankruptcy, experts say.
Store closings most likely will affect central Ohio shopping centers, said Columbus retail analyst Chris Boring of Boulevard Strategies. Boring expects store vacancies locally to exceed the high of 12 percent recorded in 2002.
They're already pretty close. Retail vacancies in the Columbus market reached 11.9 percent at the end of September, said Grubb & Ellis, a commercial real-estate services firm.
"The good news is that we're finally not overbuilding," Boring said. "I don't understand how an economy based on buying things that we don't really need is sustainable."
Store closings outpaced store openings for the first time since statistics started being kept in 1980, Boring said. The tough times are already trickling down to shopping-center and warehouse owners.
Retail landlords are bracing for an onslaught of tenants seeking lower rents until sales recover, a nod to tough circumstances that Nationwide Realty Investors offered its Arena District tenants during the 2004-05 NHL lockout. During that period, rents were cut in half.
"A lot of retailers, bankrupt or not, are calling us and asking for rent reductions," said Don M. Casto III, a partner in the Casto development company. "You deal with that in any downturn in the economy, but it's worse now than it has been in my business career."
Richard Schuen, president of the Columbus office of Grubb & Ellis, described the concession environment as "brutal." It could have an effect on landlords' ability to make their mortgage payments.
"Many of these developers and owners are getting these form letters just like a 'Dear John' letter," Schuen said. "Some have hundreds if not thousands of locations, and they're pounding away on landlords asking for concessions.
"You've got debt service to pay every month, and it's having a negative impact on that ability to refinance and recapitalize the asset in some manner, or sell the asset."
Local companies Big Lots and DSW say they expect to pay lower rents on new and existing locations. Many national retailers have reported that landlord concessions have allowed them the financial breathing room needed to open stores, or retain ones that otherwise would probably not have survived.
Central Ohio-based chains are not projecting significant store closings, although their sales figures and share prices are down across the board. A number of them are clamping down on growth, though, delaying store openings or, like Abercrombie & Fitch, going to virtually zero-growth mode in the U.S.
Others are in worse shape and could close stores. Casto said some of his company's clothier tenants, such as Talbots, Coldwater Creek and Jos. A. Bank, "are hunkering down as best they can."
"The biggest weakness we're facing is fashion retailers," he said. "They're in a state of complete collapse. I don't know how long that's going to last."
Warehouse owners also are feeling the pinch. Value City recently closed a 430,000-square-foot store and distribution center in Westerville. There could be a glut of warehouse space on the market if retailers fail.
"Nobody's immune from this," Schuen said.
The weakened retail performance could cause dramatic shifts in store locations.
Retail tenants nationally are gravitating toward the newest and best-maintained malls, said Adam Flatto, president of Easton co-developer Georgetown Co. That's partly because millions of square feet of retail space have been added in central Ohio in the past decade, draining older shopping centers of tenants.
"There's a flight to quality in terms of real estate," Flatto said.
Local real-estate vacancy numbers include those for properties such as Columbus City Center, which sits virtually empty as the city tries to come up with a plan for it, and the once-vibrant Worthington Square Mall. Both lost numerous tenants to newer shopping venues.
"Retail is a game of musical chairs. The music is always stopping and starting, and older malls suffer," Boring said.
Even shiny new outdoor "lifestyle centers" aren't immune. The Shoppes at River Ridge, which opened on the Northwest Side in August 2007, has many vacant storefronts. Glimcher's new lifestyle center at Polaris Fashion Place, meanwhile, has had no problem filling its space.
The three newest local malls -- the Mall at Tuttle Crossing, Polaris Fashion Place and Easton Town Center -- all report vacancy rates of less than 2 percent.
Easton has lost tenants such as the Bombay Company and the Discovery Channel Store because those chains have cut stores nationally, but Easton has moved quickly to fill the vacancies from a waiting list. Tuttle and Polaris have an empty storefront or two, and both will be losing a KB Toys, but their management representatives say they're in good shape.
Things are tougher for many strip centers that have lost a major tenant such as a supermarket or "big-box" discount store such as Kmart. All around the Columbus area are gap-toothed centers that have lost big tenants in recent years.
"The biggest challenge in retail is what to do with an empty big-box," Boring said. One small area of opportunity Boring sees is a newfound willingness on the part of landlords to work with local single-store startups to help replace the chain stores that are cutting back. But opening a new store or keeping an existing boutique going will remain very tough, given the credit crunch.
Meanwhile, experts say chains that are stable and have exercised fiscal discipline will continue to face tough conditions but can take advantage of the current situation in commercial real estate.
Big Lots, for example, has closed more stores than it has opened in the past three years. That may change this year, said Tim Johnson, vice president of investor relations.
"The challenges in the market have allowed us to improve the quality of our locations," Johnson said. "We're able to be more selective today than we were a couple of years ago about things such as the type of property and our position in the center."
New Big Lots stores, like those of several other chains, including Walmart, are likely to be pared down. A trend toward smaller store prototypes is also expected to contribute to a strong downturn in the amount of new retail real estate coming online in the next year or two.
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