The big, yellow “Closing” banner caught Greg Allen’s attention.
“I decided to see if there are any deals,” the Home Depot flooring salesman said. “It is surprising because Sound Advice has been around for a long time.”
Allen was among a steady flow of bargain hunters streaming into the Sound Advice on Federal Highway in Fort Lauderdale on Nov. 17. It had been little more than a week since the beleaguered stereo and electronics retailer announced the closing of 94 stores nationwide, including all in South Florida.
“They say we are in a recession, so I might as well save money as much as I can on something that I need,” said Ariel Umana, a photo specialist at a nearby Walgreens. He was on the hunt for a CD player.
Sound Advice, rocked by competition and declining sales, is hardly the only retailer sinking in these stormy economic seas.
Linens ’n Things, Floral Supply Mart, OfficeMax and The Rag Shop have also closed stores. After two years in business, the Brandon Fine Furniture store in Fort Lauderdale closed. The closures have given rise to a swell of empty big-box spaces in an environment where few are lining up to lease space.
“From this point forward, we are estimating 14,000 retail doors will close,” said Richard L. Kaye, executive VP of the Hilco Organization, an asset disposition, appraisal and acquisition firm. The Northbrook, Ill.-based firm is handling the liquidation of bankrupt Linens ’n Things.
The combined store closings will flood the retail real estate market with about 75 million square feet of vacant space by the middle of next year, Kaye said.
“Frankly, it is going to be a very challenging environment for retail space in general,” he said.
The cracks are already starting to form in South Florida’s once-Teflon retail sector.
Third quarter vacancy rates were at a five-year high, according to Reis research. In response, third quarter rents dipped lower across South Florida.
Many retail real estate experts are bracing for vacancy rates to spike several percentage points by early next year, as sluggish holiday sales are likely to wipe out more retailers.
“I think everyone imagines that January of 2009 will not be a pretty picture,” said Stephen Bittel, chairman of Terranova Corp., which owns and manages 3 million square feet of shopping centers in South Florida. “Christmas was always critical, but this year, Christmas assumes unusual importance.”
Bittel said home goods, apparel, and restaurants are the most vulnerable.
The downturn, however, could create opportunities for some retailers to grab prime spots at discounted rents.
Dollar Tree is looking to open as many as 20 new stores across South Florida, said Bill Rotella, president of Fort Lauderdale-based Rotella Group, which is representing the discounter. The chain’s stores range from 10,000 to 20,000 square feet.
“Landlords are aggressively trying to get their boxes re-tenanted and are being as flexible as they can,” Rotella said. He estimated deals are now being cut for rents that are 20 percent less than a year ago.
According to local brokers, other big-box retailers now looking to move into South Florida are: Indianapolis-based electronics and appliance retailer hhgregg, with 30,000-square-foot store formats; Monrovia, Calif.-based neighborhood grocer Trader Joe’s, whose stores are 12,000 to 15,000 square feet; and Kent, Wash.-based outdoor gear and clothing retailer REI, whose stores average 27,000 square feet.
Bethany Neilson, a spokeswoman for the 105-store REI chain, confirmed that the retailer is looking for locations in Florida, but has yet to sign any leases. Despite the economy, she said, REI is not planning to deviate from its growth rate of six to eight new stores a year.
In addition to new chains, empty big-box spaces could be snapped up by existing market players looking to fill in coverage gaps, said Paco Diaz, senior VP of CB Richard Ellis.
With little new construction in the near future, Diaz said, landlords able to act aggressively to land deals and financially positioned to withstand lean times will come out on top once the market rebounds.
“Come 2011,” Diaz said, “they are going to be in very good condition.”
dlunsford@bizjournals.com (954) 949-7523
source: South Florida Business Journal
link to the original post:
List of potential tenants is tight amid a wave of store closures
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