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KAI RYSSDAL: I guess it was only a matter of time before this next item hit the news. With gas and food prices through the roof, and consumer confidence in the dumps, malls are starting to feel it. Vacancies at shopping centers around the country have hit a 13-year high as Marketplace’s Jeremy Hobson reports.
JEREMY HOBSON: Almost everything these days seems to stem from the housing crisis. But the mall crisis, if we can call it that, has a more direct connection than most. As Nicholas Vedder with Green Street Advisors puts it:
Nicholas Vedder: U.S. strip-center development follows rooftops. So wherever there’s a new master-plan community getting built, you can expect a shopping center developer to put a neighborhood, grocery-anchored center there to cater to those customers.
And he says when the housing market turned down and the customers didn’t show, the shopping centers were left out to dry. That, combined with plummeting consumer spending, has led to the boom in retail vacancies. The raw number: almost 300 million square-feet of vacant retail space around the country.
Reis Incorporated Chief Economist Sam Chandan says mall owners will have to drop rents to entice new business.
Sam Chandan: As a potential renter of space in a regional mall, if there are dark spaces, that is going to impact your assessment of how you will perform at the mall to some degree.
Now for malls, getting customers in the door has everything to do with the anchor store. In a big mall, that could be a big department store like JC Penney. In a little strip mall, it could be a Starbucks.
Both of those companies, by the way, have slashed expansion plans for the coming year. Retail analyst Patricia Edwards:
Patricia Edwards: The U.S. right now is over-stored. We have too many choices and it’s time to pull back a bit.
Other analysts agree and say retail vacancies will likely get worse before they get better.
This is Jeremy Hobson for Marketplace.
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