Borders Updates: Store Closure List, Impact on Power Centers

List of 200 stores Borders will close

Borders Bankruptcy Shines Light on Continued Weakness of Power Centers – Retail Traffic

…And other scenarios could lead to additional closures, such as sale of the company to rival Barnes & Noble or liquidation.

If that’s the case, it will be nothing new for power centers, which were hit hard by tenant bankruptcies and liquidations during the depths of the recession. Last year, the situation began to improve, with the remaining big-box players starting to sign leases for second generation space, partly out of necessity.

But now that recovery could be put on hold as the sector absorbs a new round of vacancies. And rents could continue to stagnate due to the imbalance between supply and demand. There has been positive leasing momentum among big-box retailers in recent quarters, but that has largely been limited to class-A centers in primary markets. Centers in secondary and tertiary markets are still struggling. With few big-box retailers expanding, it’s been difficult to find enough large tenants to backfill empty space.

In fact, some class-C and class-D power centers will eventually have to be razed, according to Gerry Mason, executive managing director with the New York City office of Savills, a real estate services provider.

“I think certainly in secondary and tertiary markets that were overbuilt, some of those centers will get torn down,” he notes. “A good example is Orlando, which is a primary market, but it’s the most over-retailed city in the U.S. If you drive through Orlando, you will see power centers that will never be leased. There are millions of square feet of space there.”