Retail Store Closings Up

In our course we specifically point out factors you need to take into consideration when buying a triple-net-lease investment. Personally, we have not ever invested in a retail clothing outlet strip center because of the vulnerability in economic cycles.

For the educated triple net lease investors, economic downturns can even be good things. For instance, one strategy we lay-out is having counter-cyclical tenants. That is tenants who prosper during bad economic times, like Auto Zone. More people fix their car instead of using a mechanic or buying a new one in bad economic times. This is why you need to be an educated triple net lease investor.

NREI had this to say regarding the recent retail store closings:

Apparel stores accounted for about 35% of the 2,831 store closings tracked by the International Council of Shopping Centers (ICSC) in the first half of 2008. The retailers that added to this tally include Wilson’s Leather, Goody’s Family Clothing, Ann Taylor, and Geoffrey Beane-outlet stores.

Retailers focusing on home entertainment, home furniture and furnishings, and food and beverage have also been at the forefront of the store closings during the first half of 2008.

About 6.5% of the store closings through the first half of 2008 tracked by the retail industry trade group were in the home furniture and furnishings niche, one that moves in tandem with the housing market. However, this is an improvement considering that this niche accounted for more than 14% of store closings in the first half of 2007, and about 34% of the closings in the second half of 2007, according to ICSC.

“The stores that are more susceptible to slowdowns in the economy are the stores announcing closings,” notes Abigail Marks, an economist with CBRE Torto Wheaton Research in Boston. “Consumers have less discretionary income right now, so non-essential goods such as clothing are struggling with sales. Thus, some clothing retailers have to close stores.”

PPR’s Mulvee anticipates that, following a soft 2008 Christmas season, the first quarter of 2009 will likely be another big quarter for store closings with as many as 3,400 closings projected.