Halloween Specialists Scare Up Prime Retail Spots

by Doug Desjardins

Specialty retailers have been hit hard by the recession as cash-strapped consumers move to mass merchants and discount stores to save money. But one of the unlikely beneficiaries of the retail slump are seasonal Halloween retailers. halloween-shopping

National chains like Spirit Halloween and Halloween Adventure are accustomed to occupying whatever space they can find for the Halloween sales season, since they usually move in for just a month to six weeks. But that's not the case this year in the wake of a retail meltdown. With thousands stores being shuttered and some chains closing down entirely, including industry stalwarts like Circuit City, KB Toys and California-based clothing store Mervyn's, Halloween shops are making the best of other retailers' misfortunes.

In many cases, it's allowed them to move into large, cavernous stores with high profiles. A case in point is a new Halloween Adventure store in Glendale, Calif. occupying an abandoned Mervyn's that anchors the Glendale Galleria shopping center. Like Circuit City, Mervyn's recently shuttered all of its stores and the building owners are leasing them at discount prices rather than leave them empty for months on end.

Shopping center owners are more than happy to take what they can get in an economy that's devastated their business. According to the International Council of Shopping Centers, retailers closed a record 6,913 storefronts in 2008 and are on pace to close 5,500 in 2009. Hessam Nadji, research director for research firm Marcus & Millichap, said that shopping centers have been hit with a "dramatic loss of tenants" and are taking a different leasing strategy to survive a retail slump that's expected to continue into 2010. "The effect on the consumer in this recession has been dramatic in its effect on retail sales and the retail real estate industry," said Nadji.

Another boon for Halloween specialty stores are the hundreds of out-of-work retail managers. Joe Purifico, CEO of the 125-store Halloween Adventure chain, said some of the vacant big box stores his company now occupies are run by former managers, noting that he's getting "Circuit City regional managers and Linen 'n things managers that had responsibility for $80 million and $100 million stores."

The better locations and cheaper rents should help seasonal retailers turn a profit this year even if Halloween sales don't reach the $5.7 billion they generated in 2008 (according to the National Retail Federation), since they are paying lower overhead. A survey conducted by Reis Inc. estimates the retail vacancy rate jumped to 10% in the second quarter of 2009, the highest rate in 17 years. That's produced an average decline of 4% in lease rates from 2008 and they've plunged even lower in parts of the country harder hit by the recession.