The list of pending store closings in the Washington area is mounting, but the retail shakeout may not take the wind out of the market’s sails just yet.
Analysts, brokers and economists agree that there are enough merchants on an expansion kick to lease much of the space coming available. TJ Maxx, Equinox, Modell’s Sporting Goods, Ross and Nordstrom Rack are scouting sites around town.
Looking, however, doesn’t exactly equate to leasing.
Consider that many of the former Borders bookstores that shuttered following the company’s bankruptcy last year remain empty. It doesn’t help that the new list of stores slated to go dark, in many cases, are more than 10,000 square feet, narrowing the pool of replacements.
In the past two months alone, six retailers have announced plans to shut a total of 14 stores in the region. Just last Wednesday, Macy’s said its Bloomingdale’s at White Flint Mall and Macy’s store at Laurel Mall would close by spring. Penn Camera, on the same day, posted a notice on its Web site about filing for bankruptcy protection and the immediate closure of five of its eight locations.
The week before Penn Camera’s decree, Sears said it would close up to 120 stores to raise cash, including a location in Ellicott City. In the same week, home furnishings retailer Pottery Barn sent customers an e-mail saying that its location in Friendship Heights would cease operations on Jan. 16. Meanwhile, Filene’s Basement is liquidating the remaining merchandise at its four stores in the area to cease operations by the end of this month.
The sheer volume of closings is daunting, but broker Bill Miller of Transwestern Retail said the shakeout pales in comparison to vacancies during the recession.
“When Linens ’n Things and Circuit City went out of business, it was bigger, there were way more locations and the market was worse,” he said. “Is what we’re going through now death and destruction? Not so much.”
Delta Associates chief executive Greg Leisch echoed Miller’s sentiments.
“Washington has the lowest vacancy rate, highest income and lowest development pipeline in the country,” he said. That combination of factors bodes well for the market in the face of rising vacancies.
What we’re seeing, Leisch said, is a “natural structural shift” in retailing, whereby pressure from online operations is resulting in contraction of brick-and-mortar stores.
“You look at Penn Camera or Borders and the goods they sell is merchandise that has thin margins and is sold widely online, so we can’t be surprised that they’re closing,” he said.
Kantar Retail economist Frank Badillo said continued pressure from online merchants likely will lead to further consolidation, though that will be a long-term process. If the economy falters in its recovery, however, he anticipates the pace of consolidation will speed up.
Store closings announced in the past two months by six different retailers.