Vacancy Increases in Tough Retail Market, But Retailers Adapting

Overview

Vacancy in the Portland Metropolitan Area retail market increased during First Quarter to an overall 6.5%, with a negative absorption of 264,390 sf. Every submarket except two showed increases in vacancy of at least half a percentage point. Central City stayed relatively stable from last quarter at 8.2%, with a few thousand feet of negative absorption and considerable movement in small spaces.

The Eastside retail market was 5.6% vacant with a negative 40,226 absorption, largely due to Circuit City closing its 42,555 sf store at the Jantzen Beach Supercenter. Southwest Retail had the highest negative absorption at 82,341, with substantial space available at Canyon Place Shopping Center in Beaverton and Washington Green Shopping Center in Tigard near Washington Square. Vancouver vacancy increased more than a percentage point to 7.9%, with considerable negative absorption in spaces under 10,000 sf.

Noteworthy News

National retail sales last quarter were better than expected, with a 1.8% gain in January and only a 0.1% drop in February. Though these numbers were an improvement over months of declines, they don’t necessarily signal a turnaround, and many retailers are taking serious measures to cut costs. One trend is tenants, including large, national chains, renegotiating leases. Pier 1 has begun talks with landlords to reduce rents and says it will close up to 80 stores if it can’t cut enough costs, while retailers like Gap and Finish Line are attempting to cut down on store square footage.

Retailers around the country are using creative strategies to adapt to the new retailing environment. Promotions and special sales can reel in frugal consumers, and one restaurant in the area is going a step further than traditional sales or specials. The Blue Sage Café, with locations in Lake Oswego and West Linn, ran a special promotion for a few weeks (which may be extended) that allows restaurant-goers to choose how much they want to pay for an entrée.

Another tactic is to cut back hours or days of operations. Westfield Vancouver Shopping Center, for instance, is opening half an hour later and closing half an hour earlier on weekdays. Kitchen Kaboodle, locally owned with five locations in the metro area, is completely closing its stores three days a week.

Bankruptcy filings have become more common in this recession, and local retailers aren’t immune. Joe’s Sports & Outdoor, previously G.I. Joe’s and based in Wilsonville, filed for Chapter 11 bankruptcy in early March and explored its reorganization options, including seeking a buyer for the company.

The full report is available on our Web site.