The recent announcement that Steve & Barry's was seeking Chapter 11 bankruptcy protection and would close a large number of stores has sent a shiver through shopping center operators who have watched vacancy rates continue to climb in recent years.
A study by Reis Inc., a real estate analysis firm, found the vacancies at neighborhood and community shopping centers are running at a five year high.
Stuart Hirshfield, a bankruptcy lawyer at Mintz Levin, said that in the current environment, even prime anchor space could be hard to fill. He talked about the possibility of Steve & Barry's closing stores as part of its Chapter 11 bankruptcy filing. "Their stores could be dark and be dark for a while," he told MarketWatch. "It does put a strain on mall operators and their own revenues."
According to the Reis study, increased food and energy costs have meant that consumers are no longer willing to travel long distances to shop or stop at multiple locations while they are out. Larger discounters offering near one-stop shopping have been the main beneficiaries of consumers' new purchasing patterns. Retailers in smaller shopping centers have not fared as well.
"If there's a big concern it's on the small center side," Michael Niemira, chief economist at the International Council of Shopping Centers, told Women's Wear Daily (WWD). "Whether the centers can capitalize on the trend of shopping closer to home because of gas prices remains to be seen."
Discussion Questions: Will we begin to see shopping center vacancy rates level off and slowly begin to decrease? If consumers are drawn to centers with large discounters, what can merchants in smaller locations do to convince consumers that it is a wise use of gas to drive to these stores?