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• Retail landlords and investors fear losing tenants amid so-so holiday sales.
• Any retail tied to future residential development is most at risk, reports Colliers.
• Costco, Sam's Club, BJs Club, T.J. Maxx and Ross Stores look for new sites as membership and customer base grows.
• Nordstrom opening off-price Nordstrom Rack stores nationally.
• Grocery stores with competitive price points are thriving. 
• Target is expanding grocery section in 100 stores.
• Dollar General will open a record 450 new stores in 2009 and plans to top that number in 2010 with 500 new stores.
• Walmart planning new smaller store-size format under 200,000 SF.
• Budget-priced Supercuts outlets are doing well but high-end beauty salons are not.
• Doing the worst are luxury retailers, department stores, high-end apparel and upscale restaurants.
• Traditional music stores are history.
• Big-name retailers start new-trend Pop-Up (temporary) retail outlets in smaller space with shorter leases.

Ross J. Moore

(NEW YORK, NY) -- It's a whole new ball game in the retail real estate leasing industry as 2009 winds down and 2010 ushers in new trends, new faces and new leasing demands.

Colliers outlines the coming retail space landscape in its newest survey. The report was prepared by Ross J. Moore, executive vice president, market and economic research; and Garrick H.S. Brown, national retail research director.

"There are still some retailers growing in this economy, though the industry on the whole remains in a contraction mode," the report's authors conclude.  "In some cases, this is due more to evolving technology trends than the 27-month-old Recession."

The Colliers' analysts "expect a surge of retail closures in early 2010."  They anticipate the retail market will continue to shrink for another two years.

Their reasoning:  Retail markets were overbuilt in the last few years, pushing vacancy in metros such as Las Vegas, Phoenix and Sacramento over the 12 percent mark.

"Holiday sales will not provide needed relief," the report states.  "Many retailers are selling notes or pursuing other methods of recapitalization, but the reality is there will be more failures ahead.  Access to credit won't just be a factor for national credit retailers."

Still, the 2009 holiday shopping season has helped some retailers, shocked others who had expected strong sales and driven home a clear message from consumers:  Price is what they want - the lower the better.


As for occupancy, many retailers are still growing and will require more space.  Other merchants in large-leased quarters are shrinking and may not survive at all.

Overall, the demand will be for smaller space with shorter leases.

Right now, however, "retail landlords and investors are fearful of losing tenants and have virtually no ability to dictate terms or price," the report states.

"While the latest GDP (Gross Domestic Product) results were encouraging, the U.S. retail landscape remains one of the most challenging many can remember."

Colliers makes that analysis even as the International Council of Shopping Centers states October sales will show a 1 percent gain.  RetailMetrics predicts a 2 percent increase. There are no hard numbers out yet for November.

Still, maintains Colliers, "concerns remain as to whether some of these increases are the result of pre-holiday season sales, as more retailers have been offering deals to get consumers back in their stores."

That strategy has worked for some, but not for all.

• For example, Colliers reports luxury retailers, department stores, high-end apparel, beauty salons and upscale restaurants are doing poorly.

• Budget-priced services like Supercuts are expanding.  So are the warehouse-sized retailers like Costco, Sam's Club and BJs.

• Seattle-based Nordstrom, a 108-year-old merchant, is shifting its expansion focus to off-price Nordstrom Rack stores which already are showing positive same-store performance.

• Smaller chains like TJ Maxx and Ross Stores are also expanding as their sales numbers climb.

• In the convenience-store category, Dollar General, based in Goodlettsville, TN, is on target to open 450 stores by year end.  Another 500 store opening are on tap for 2010.

• Target is expanding its grocery section in over 100 existing stores and may require additional space outside its existing premises to accommodate other departments.

• Meijer, a superstore chain based in Walker, MI, is pushing into the Chicago market with several planned 100,0000-sf sites, smaller than its typical 200,000-sf stores.

• Lakeland, FL-based Publix, the largest employee-owned supermarket chain in the U.S., plans to open 50 new stores in 2010, each averaging 50,000 square feet at least. Rivals Winn-Dixie and Food Lion also plan 2010 expansions at new leased sites.

Of the 43 major markets Colliers tracks, only 10 have posted positive occupancy growth this year.  Charlotte, NC led the list with over 420,000 square feet through the third quarter of 2009.

Colliers looks to Texas to fare the best in 2010 retail space development as it leads the U.S. out of the Recession.

"Central Texas' economy has outperformed many other markets during the current downturn," Bobby Dillard, vice president-development, Direct Development, Dallas-Fort Worth, tells Texas Real Estate Business.

Bobby Dillard

"We are still signing leases and the few tenants that are looking for space have gravitated toward Central Texas due to the relatively strong sales in the region," Dillard says.

Jeff Newberg

In Austin, the Texas capital, overall occupancy "has continued to decline to just under 90 percent," Jeff Newberg, managing principal, Endeavor Real Estate Group, Austin, tells Texas Real Estate Business.

"Average rental rates for vacant space have decreased approximately 12 percent to about $20 per square foot, still well above the national and statewide averages," Newberg says.

In San Antonio, "it's all about free rent," he adds.

Keith McRee

Like the Colliers report, Keith McRee, vice president-retail services for NAI REOC Partners in San Antonio, says grocery-anchored or power centers are the best performers.

"This is happening as tenants are looking to try and feed off of the larger retailers, even more now (than previously)," McRee tells Texas Real Estate Business.  "This, along with less competition for space, has allowed for more opportunities for some tenants to get into the larger projects."

Michael Watson

Michael Watson, regional manager, Marcus & Millichap, Austin, sees "a bit more optimism in the second half of this year...(but) a full recovery will not take place until 2010."

Investment activity in San Antonio "has declined more modestly than in other national metros," says Watson.  "Many local investors who were on the sidelines as out-of-state buyers bid up prices are now returning to the market."

The newest darling in the retail leasing arena are the Pop-Up stores, or temporary retail outlets.  They are "very much the rage" in many markets, reports Time Magazine.

Michael Watson

Some come and go within weeks of opening.  They could offer a sample sale one day and host a private cocktail party the next evening.

Pop-Up store space may be found  at freestanding mall outlets, in and at the store properties themselves, at vacant strip mall sites and even at non-retail oriented locations. 

Leases are generally for one week to several weeks and some up to a year.  Landlords do them to create the illusion of consumer activity.

"Pop-ups provide an opportunity for retailers to test a product and create some buzz around the brand," explains Faith Hope Consolo, head of retail leasing at New York City-based Prudential Douglas Elliman.

Faith Hope Consolo

"They are making a short-term investment for what could be a long-term gain," Consolo says.  She has been deluged with requests for prime pop-up locations throughout New York City.

"New York City has plenty of empty (retail) space right now," agrees Sam Chandan of Real Estate Econometrics. The vacant space is "a landlord's worst nightmare."

Mike Kraus

Mike Kraus, an independent retail consultant, says "because of the significant empty-space issue across the board, pop-ups are an opportunity for both entrepreneurs and big brands to make some money without having to worry about the overhead of a five-year lease."

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