Wednesday, December 28, 2016

Lease Expiration, Taxes, Vacant Retail Space

Expect thousands of store closings in the next eight months. Ten-year leases signed in preparation for the 2007 Christmas shopping season expire in 2017. The recession began around December 6, 2007, and many of the store locations that opened that year were never profitable. The list of ten-year lease locations includes more than 500 belonging to just two retail chains, American Eagle Outfitters and Abercrombie & Fitch. Those are two slowly fading chains that surely can’t wait for the chance to close most of their locations, and of course, there are other, smaller examples. At the same time, the risk of tax increases in 2017 will make retailers reluctant to make long-term commitments on stores that show anything less than a consistent healthy profit. Combine these factors and a down 2016 holiday season with the many other uncertainties that retailers face, and the U.S. is likely to end 2017 with a record-setting amount of vacant retail space, exceeding what we saw in 2009.