Retail ranks likely to thin, strengthening the survivors

The 12 months of 2009 will bring the worst

of times and potentially the best of times

for retailers.

While those lacking a war chest may be

forced to fold their tents following a dismal

holiday spending season, the stalwarts will

find the field ripe for expansion.

"A number of retailers will stay alive and

others won't survive," says Ken Mattison, vice

president of the retail services group at Grubb

& Ellis / NCG in Reno.

Adds Kelly Bland, a vice president in the

retail group of NAI Alliance,"We're coming off

of the two worst months October and

November in memory."

Dave Claflin, vice president of marketing at

RED Development, says many signed tenants

for Legends at Sparks Marina postponed 2008

openings.

"It's bloody out there. Everyone is feeling a

lot of pressure to perform," Claflin says.

While some retailers wait it out, others

stop the bleeding by closing stores, says Shawn

Smith, a vice president working in retail at the

Reno office Colliers International.

Nationwide, 6,100 stores have closed

already, and the International Council of

Shopping Centers projects 14,000 more stores

will close in 2009.

On a local level, adds Smith, more than 35

stores were closed in 2008.

Mattison says,"Christmas season is the

make-or-break for the year. It's going to be a

light Christmas for everyone. Spending is

down 30 percent across the board. Sales that

once began after the holiday now start before

Thanksgiving.Most everyone in our sector of

the commercial real estate market is wondering

what will happen after Christmas."

Even national chains are closing anchor

stores,with some going out of business.

Yet some areas escape the squeeze.

Reno's North Valleys,with an underserved

population of 40,000, is home to 3 Flags, still

in development, says Mattison."There's a huge

need for retail up there. Of 33 spots, 31 are preleased."

"To survive, some people have had to

rethink sizing," says

Mattison.And

among individual

stores, second-generation

spaces

those vacated by the

original retailers

have become popular.

Tenants pay up to

$1 per square foot

less than at newer

centers, where lease

rates reflect the high

land and materials

costs of the past six years.

But landlords of all centers can mitigate

the damage by keeping tenants from jumping

ship.

While rent concessions may stick in the

craw, it's cheaper than recruiting new tenants.

Especially now, when even national chains are

having a tough time finding franchises to

spread their brand,Mattison says.

And retail chains are employing delaying

tactics with their planned openings of new

stores.

"The No. 1 thing stores do is try to contain

their openings," says Claflin."Retailers say,

"Let's pick the best 20 markets for expansion

and get the best deals that we can."RED

Development, he says, is also under pressure to

maintain relationships with dawdling tenants,

because the same chains are in other RED centers

nationwide.

However, the closing and restructuring of

national and local retailers and restaurants is

not a doomsday scenario, says Smith.

"When the economy rebounds, the restructured

retailers will be better positioned to

expand and take advantage of retailers who

wrecked or sank during the Perfect Storm of

2008."

That makes it a good time for big retailers

to be looking for store locations in Reno.

"While we do have a couple poking

around, they've got lots of other opportunities

around the country," says Bland.

And despite the

challenges, developers

continue to build.

About 2.2 million

square feet of retail

space is planned in

the region.

But retailers

today struggle.

"Second quarter

sales are not very

nice. People are not

using their credit

cards. During the

past three or four holiday seasons, people were

tapping credit cards and home equity," says

Frederick Steinmann, business consultant with

the Nevada Small Business Development

Center who is currently on leave to pursue a

doctorate degree.

That home ATM machine went dry when

housing prices tanked.

Taxable sales this autumn in Washoe

County were running more than 9 percent

below year-earlier figures, the state

Department of Taxation reported. Sales in

Carson City were down by more than 10 percent.

Yet optimism remains.

"I firmly believe 2009 will be better than

2008," says Claflin."I believe we've seen the low

point of the cycle."

But in the short term, even if the feds issue

another stimulus check,warns Steinmann,

"Consumers will use a future stimulus check

to pay down debt. There's plenty of liquidity in

the system. There's just no consumer confidence."