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Retail Bust? Will New Haven County feel the pinch?

The New York Times reports today that several retail chains are tightening their belts and may be heading to bankruptcy courts. The trend should come as no surprise to many economy watchers. Midsize chains are being hit the hardest. While economic difficulties for the furniture store Levitz, a chain that has been wobbly in the New England region for three or four years, may come as no surprise; a new sofa becomes less a priority than fuel delivery, the fall of Sharper Image an upscale gadget store may be a little more daunting.

Foot Locker, Ann Taylor and Zales are taking some of their stores dark in order to keep cash flowing. In the case of Ann Taylor, founded in New Haven in 1954, 117 of its 869 stores nationwide will be shuttered. Zales, the diamond specialist is shuttering 100 stores, however with more than 1400 stores nationwide and 700 additional mall kiosks, this news may not be as dire as the Times predicts. But, it is a growing indication that non-essential spending is on the decline across the country.

Like the rest of the country, retailers are consumers. They buy product in advance of the season on credit and pay back when the merchandise leaves the shelves. If it?s not taking off, retailers are left sitting in expanding debt.

The International Council of Shopping Centers which tracks retail data, predicts a 25% increase in store closings this year over last as chains try to recapture losses. Chains like Linens n? Things a large specialty store, and the Office Supply Chains are likely to be hit. In a recession economy big box niche stores are going to feel the bite as consumers decide that manila folders are as useful as hot pink, the printer will last another year, bath towels can be washed, interior decorators homes will scale back on knick knacks for the home, paint and new window treatments.

With new shopping centers well into construction in Orange, Milford and a large center on the books in Guilford, shoreline towns may see centers erected that are still 30% dark. Very often large retail center developers like D.D.R. (Developers Diversified Realty Corp), who are scheduled to break ground on a large retail center in Guilford pending final town approvals, infill large retail centers with local merchants. They may find it difficult to find local shop owners willing to jump to national market rents in this economy.

Ripple effects from the closing of retail outlets will likely pervade many sectors of the real estate market. Class ?C? office spaces may see rising vacancy rates as call centers scale back. Distribution centers, particularly in the Midwest may see a rise in vacancy and overseas manufacturing of consumer goods is likely to take a hit. Connecticut?s commercial market remains strong as we saw the bulk of our distribution and call center users leave the state in the early nineties. Recessionary economies can also be good news for service contractors, such as auto repair; plumbers and electricians as consumers endeavor to repair instead of replace.

kristin

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April 15, 2008


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