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Retail spaces open up

By   /   Thursday, October 23rd, 2008  /   Comments Off on Retail spaces open up

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A mid-October announcement that the struggling department store Mervyns will soon close all of its remaining 149 locations is just one example of retailers failing as consumers cut spending amid a weakening economy, opening up hundreds of thousands of square footage in the Tri-Counties.

Hayward-based Mervyns plans to hold a going-out-of-business sale during the holiday season and shut down for good under Chapter 11 bankruptcy. On the Central Coast, Mervyns maintains six stores in San Luis Obispo, Santa Maria, Lompoc, Ventura, Oxnard and Thousand Oaks.

“We are disappointed with this outcome but the company’s declining liquidity position and the extremely challenging retail environment, together with the fact that we have exhausted all other possibilities, requires that we take this action,” said John Goodman, chief executive officer of Mervyns in a recent release, adding that he expects the sales to “drive significant traffic” to the Mervyns stores.

On July 29, Mervyns department store announced it had filed for Chapter 11 bankruptcy with the intention of restructuring the operations of its 177 stores in seven Western states, but the retailer later said it had explored all other options before resorting to the closure of the company.

In an affidavit, Mervyns Executive Vice President, Chief Financial Officer and Chief Administrative Officer Charles Kurth had cited the declining housing market and the tightening of the credit markets as a reason for the drop in consumer discretionary spending that has led to the retailer’s downfall.

Following a May 2 filing for Chapter 11 bankruptcy protection, Linens-N-Things has announced it will go out of business with all sales final. It announced the closure of 57 underperforming stores in July. The company has operated approximately 500 stores in 47 states and six Canadian provinces.

On the Central Coast, Linens-N-Things has stores in San Luis Obispo, Santa Maria, Goleta and Ventura.

Stephen Leider of Lee & Associates in Santa Barbara said Mervyns and Linens -N-Things alone comprise about 320,000 square feet of retail space in San Luis Obispo and Santa Barbara counties.

In certain locations, like San Luis Obispo, Leider said he expects multiple users have the potential to take over the space, while Lompoc and Santa Maria locations may be harder to fill.

In addition, Leider said he expects more store closures to follow, making the retail leasing environment even more challenging and driving down rental rates.

“If we have more failures, I think we’re going to sit there with some empty stores,” Leider said. “There’s not an abundance of tenants running around that want to backfill multiple locations, and landlords may find themselves doing replacement tenants, but with less rent than they’re currently getting.”

David Rush of CB Richard Ellis in Camarillo agreed there will likely be more store closures, but was hopeful that the vacated retail space will be filled as the economy improves.

“Whenever there are difficult economic times as we’re having now, part of the negative effect is the reduction of major retailers we’ve all come to know over many years and, in the short term, there will be a negative effect by these vacancies because they’re large spaces to fill,” Rush said. “But these retailers selected, for the most part, premium locations so as economic times recuperate, these spaces will be highly desired and will be backfilled with quality retailers.”

On Oct. 20, Sherman Oaks-based Shoe Pavilion also reportedly announced the closure of its 64 stores following a liquidation sale in the coming 10 to 12 weeks. The discount shoe retailer had filed for Chapter 11 bankruptcy protection in July.

Shoe Pavilion operates throughout the western United States and has at least three locations in the Tri-Counties.

This summer, Starbucks coffee announced nearly 90 store closures in California, based on specific store profitability and current and anticipated economic trends. None of the closures was in San Luis Obispo, Santa Barbara or Ventura counties.

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