U.S. strip malls suffer as retail tenants disappear

Tue Nov 25, 2008 7:29pm EST
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By Chelsea Emery

NEW YORK (Reuters) - Along a congested highway in New Jersey lies a small strip mall whose challenges illuminate those of malls throughout the the United States as their tenants are brought low by the economic slump.

In the past several weeks, the eight-store Paramus Towne Square mall in Paramus has seen the parent companies of two of its anchor stores, home goods seller Linens 'n Things and electronics center Circuit City, file for bankruptcy.

And, earlier this year, the mall had to find new tenants for a Borders bookstore, which closed when its parent company cut costs.

"If you are an owner of a mall or a small strip center, it's been a very difficult year and likely to get worse next year," said Mark Claster, a partner at the turnaround and financial advisor, Carl Marks Advisory Group LLC.

Even more so than mega-malls, strip malls -- with a dozen or so stores stretched along busy U.S. highways -- define the American retail landscape, and their owners are suffering.

"Landlords are taking a beating," said Bob Carbonell, chief credit officer for retail credit rating service Bernard Sands.


U.S. retail vacancy rates rose to 6.6 percent in the third quarter from 6.1 percent a year earlier, according to CoStar Group, a provider of commercial real estate information and data.   Continued...

<p>Two workers stand with going out of business sale signs in front of the "Linens n Things" store that is closing at the Paramus Towne Square mall in Paramus, New Jersey, November 18, 2008. Shopping centers, a category that includes strip malls, are doing much worse than that, reporting vacancy rates of 9.4 percent. Larger, enclosed malls are doing better, with vacancy rates of about 3.9 percent. The store closings have come as the U.S. economic downturn forces retailers to scale back expansion plans, close outposts or file for bankruptcy protection. The trend is expected to accelerate as the financial crisis has tightened credit, say retail analysts and restructuring experts. REUTERS/Mike Segar</p>