As though anyone needed a reminder of the economic times, mall shoppers will pass empty stores here and there as they pick out holiday presents. But mall owners are remodeling their spaces and bringing in new tenants despite the scars from the recession.
In Olympia, Westfield Capital mall’s manager said young-adult apparel retailer XXI Forever will lease the lower level of the former Mervyns, which closed at the mall about three years ago.
Despite those bright spots, data from real estate information company CoStar Group show retail vacancy in Thurston County has jumped since this time last year, from around 3.6 percent to 4.2 percent. Rents have shown a subsequent drop, from just over $21 to just under $20 per square foot.
Scott Montgomery, a retail specialist with CB Richard Ellis in Tacoma, said shopping malls handle leasing internally so he doesn’t have vacancy and rent data specific to them. Tacoma Mall spokeswoman Sarah Bonds said the mall’s parent company, Simon Malls, considers such information proprietary and won’t release it.
Filling retail spaces during a down economy and a credit crunch is no easy task.
Montgomery said one of the biggest issues in retailing is vacancies in big box stores – those structures 25,000 square feet and larger whose owners went out of business as the economy melted down.
There just aren’t enough single retailers out there who can take over those empty spaces, he said.
Montgomery thinks owners of those buildings will have to be creative to get them filled. Though they were designed for one tenant, the buildings probably will have to be leased to multiple tenants just so the building owner can bring in some money. And that means spending a little to split up the space or negotiating lower rents so tenants can do the work.
Dick Outcalt of Outcalt & Johnson, a Seattle-based retail strategy team, agreed that the recession has irrevocably changed retailing.
“It’s survival of the fittest,” he said. The survivors will be “those who are most able to change, not the most muscle-bound.”
“It sure requires a lot of flexibility on the part of the mall owners,” agreed his business partner, Pat Johnson. “It’s a whole new way of thinking that they haven’t had to address frequently.
“The years of the 10-year leases are gone,” she said.
“Instead of being sought after, the mall people are now seeking after somebody to come in,” said Outcalt. “It’s a big shift.”
Even if a retailing entrepreneur wanted to open up shop – good luck getting a loan.
The federal government is trying to help. Last week President Barack Obama announced that some of the $138 billion left in the Troubled Asset Relief Program, designed to bail out the national banks, will be shifted to community banks to encourage lending. And he is asking Congress to increase the maximum size of Small Business Administration loans from $35,000 to $50,000 so companies can invest in machinery, equipment, land and buildings and expand their payrolls.
But it’s unclear how long it will take for people to feel comfortable spending again.
The monthly consumer confidence index, measured by The Conference Board Consumer Research Center in a survey of 5,000 households, fell again in October.
“Consumers also remain quite pessimistic about their future earnings,” said Lynn Franco, director of the research center, in a statement last week “a sentiment that will likely constrain spending during the holidays.”
Kathleen Cooper: 253-597-8546
News Tribune staff writer John Gille and Olympian staff writer Rolf Boone contributed to this report.