The fallout from the recession is apparent in empty storefronts at shopping centers and strip malls throughout the region as retailers shut their doors to cut costs amid a steep slowdown in consumer spending.
The closings could have a wide impact on the local economy, hurting developers and retail brokers and leaving consumers with fewer shopping choices. Struggling shopping centers and malls, such as Owings Mills Mall, could face further hardships. Vacancies could hurt other businesses in retail centers that rely on a variety of shopping choices to attract customers."Every retailer is in the mode of conserving cash," said Howard Davidowitz, chairman of Davidowitz and Associates, a real estate brokerage and consulting firm in New York. "And almost all of them are in a form of life support."
Circuit City, which filed for Chapter 11 bankruptcy protection in November, has closed 15 stores in the area, leaving shopping centers such as the Centre at Golden Ring with hulking vacancies. Towson Place shopping center is trying to lease a vacant former Blockbuster along with the empty space where discounter Filene's Basement recently shut its doors. Filene's also left vacancies at Snowden Square shopping center in Columbia and Hunt Valley Towne Center, which also recently lost a Cheeburger, Cheeburger franchise.
An entire shopping center sits vacant on York Road in Towson, where bankrupt Linens 'n Things and the electronics chain Tweeter went out of business late last year. The center's CompUSA closed two years ago.
There were 6,913 store closings nationwide in 2008, according to the International Council of Shopping Centers, the most since the trade group began tracking the data in 2001.
Vacancy rates in the country's regional malls rose to 7.1 percent during the fourth quarter of 2008, according to New York research firm Reis, the highest since the firm began tracking the vacancy rate in 2000.
Vacancy rates at neighborhood shopping centers rose to 8.9 percent last year, also the highest on record. In Baltimore, vacancy rates rose to 5.8 percent last year, compared with 4.5 percent in 2007, according to Reis. (The firm does not track local mall vacancy rates.)
General Growth Properties, which owns, operates or manages more than 200 malls in 44 states, including most of the malls in the Baltimore area, and leasing agents for area centers declined to discuss vacancy rates.
But General Growth executives said in a recent earnings statement that the company's financial problems have been worsened by increasing vacancies at its malls. The Chicago-based company is trying to stave off bankruptcy as it faces deadlines on millions of dollars in debt.
As the economy continues to contract and consumers curb spending, experts only expect things to get worse. The International Council of Shopping Centers estimates that 3,100 more stores and chains could announce closings during the first half of this year. The number of closings could be as high as 73,000 stores, which includes independently owned shops. For example, women's retailer Ann Taylor said recently that because the economy was weaker than expected, it would have to close more stores than initially planned.
The vacancies are a particular blow to many enclosed regional shopping malls, which have suffered from declining traffic for years and have been looking for ways to reinvent themselves. Many have lost large anchor stores that they have found hard to replace.
Boscov's department store left vacancies at White Marsh, Owings Mills and Marley Station malls when it downsized two years ago. Owings Mills was left with two large anchor spots unfilled. Lord & Taylor closed in 2007 and remains empty.
"The malls are challenged, there's no doubt about it," said Thomas Maddux, president of retail brokerage KLNB Retail, which was hired recently to handle the leasing or sale of the former Boscov's space at White Marsh Mall. "Traditionally, malls were based on department store anchors, and there are fewer department stores."
Smaller tenants often move to malls and shopping centers because of the presence of large anchor stores, which attract consumer traffic.
The owners of the family owned Liberatore's restaurant, which is situated in a Bel Air shopping plaza that has lost a Tweeter and other tenants, said they do not believe they have lost business because of the closings. But they said it can be disconcerting to see empty storefronts.
"Seeing the empty stores to the left and to the right can have a negative effect," said Danny Ferrara, co-owner of the Liberatore's, which is part of a chain of seven. "People start asking, 'What's going on? Is that bad? Are you next?' "
Empty spaces are hard to fill in this economic environment. Fewer retailers are looking to expand, and those that do are likely to find it more difficult to secure financing because of the tight credit market.
Retailers are putting pressure on mall owners and developers, demanding concessions on rent and other terms. Filene's Basement, for example, shut three stores in the Baltimore market when developers were unwilling to renegotiate lease terms.
Shopping center rents fell by 1.1 percent nationally last year, according to Reis data. In the Baltimore area, rents fell 0.3 percent.
"What is happening here is that there is a power shift between the shopping center developer and the retailer," Davidowitz said. "Retailers are asking for everything. They're asking for build-out. They are asking for different lease terms, shorter commitments, more options, lower rents."
Those in the retail industry say that times are tough but that they believe the industry will eventually shake itself out.
"One thing you can say is that for every vacancy, you have the opportunity for different types of retailers," said John Connolly, an ICSC research analyst.
Executives at Kohl's and Forever 21 capitalized on another retailer's demise and said recently that they were going to take over 46 former locations of the California-based department store Mervyns.
"This downturn is creating opportunities for others," Maddux said. "The opportunities may not be realized quickly, but there are opportunities."