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Retailers Expecting Bounce-Back Year in 2011

Retailers Expecting Bounce-Back Year in 2011
Barb Szyszkiewicz

by Doug Desjardins

After three tough years of store closures and expansion freezes, retailers are ready to start growing again in 2011.

According to the National Retail Federation (NRF), 41 percent of retail executives surveyed said they plan to open new stores this year, up from just 25 percent in 2010.

These findings dramatically demonstrate that retail expansion is back on the agenda,” said Mark Larson, global head of retail for auditing firm KPMG LLP, which compiled the survey with the NRF. The NRF credits the optimistic outlook in part to strong holiday sales, which grew 5.7 percent during the 2010 holiday season to $462 billion, the best performance since 2007.

Retailers were also encouraged by a slight decline in retail vacancies after a three-year run of increases. According to research firm Reis Inc., shopping-mall vacancies dropped from 8.8 percent to 8.7 percent in the fourth quarter of 2010, a slight decline from a high of 9 percent posted in early 2010. Lease rates also inched up during the quarter by less than 1 percent to $38.79 per square foot.

Shopping-center and strip-mall vacancy rates remained unchanged in the fourth quarter at 10.9 percent. That’s the highest rate Reis has ever recorded since it began tracking rates in 1991.

Drew Alexander, president of Weingarten Realty Investors, which owns 378 shopping centers in the U.S., observed that there’s been a drop in the number of tenants closing up shop, providing some solace and hope for a rebound.

“Things aren’t perfect but they’re clearly better,” said Alexander. He added that shopping centers are still feeling the effects of Blockbuster Entertainment’s decision to shutter nearly 1,000 stores, which hit Weingarten centers with 7 closures in the fourth quarter alone--with more expected early this year.

While high unemployment is still a concern, particularly in states like California and Michigan where rates are still above 12 percent, retailers are still encouraged that the worst is behind them and that strong holiday sales were the turning point. “There are some really good indicators,” said Nancy Thomas, president and CEO of the Retail Merchants Association in Richmond, Virginia.

Some areas of the country are better poised for recovery than others, since some states were able to maintain higher shopping-center occupancy rates. In Richmond, the retail vacancy rate now stands at 6.6 percent, down from 6.9 percent in 2009 and approaching the 5.8 percent rate in pre-recession 2006.

The St. Louis area was hit harder but is also improving. Vacancy rates were 8.1 percent in the fourth quarter, down from 8.4 percent the previous quarter. And in Eastern Massachusetts, retail vacancy rates fell from a high of 9.8 percent in early 2010 to 9 percent in the fourth quarter.


Retailers Bullish About Expansion

Retail Improves But Doubts Persist

St. Louis Retail Vacancy Rates Decrease to 8.1 Percent

A Retail Revival in Eastern Massachusetts


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