Retail 2009

European discount grocer Aldi opened 25 stores and a distribution center in Florida last year.

On the other end of the spectrum are home furnishings retailers. “They really need some help in 2009,” says McAllister, adding that homes will have to start selling, at any price, for furnishings stores to rebound. He says that department stores are going to continue to struggle this year. And the ongoing problems for women’s apparel retailers may be exacerbated by the recession, says Weitz.

Apart from automobile dealerships, which are facing their own problems with lack of credit availability, much of retail spending depends on credit card spending limits. Already, nearly 60% of banks have tightened lending standards for credit cards, according to an October survey by the Federal Reserve. That doesn’t bode well for retail this year.

Consumers aren’t the only ones hit by the credit crunch. “Retailers that are in very difficult financial situations and don’t have a very good balance sheet and have a lot of debt are in real serious trouble,” says UF’s Weitz, adding that the current environment is “shaking out the strong from the weak.” Already, Linens-n-Things has liquidated, and Circuit City has closed stores and filed for Chapter 11 bankruptcy protection. With the Christmas selling season behind them, more debt-laden retailers are likely to throw in the towel.

Stores that go out of business mean more vacancies for Florida’s retail centers. Gene Berman, senior vice president and managing director in Florida for commercial brokerage Marcus & Millichap, says, “The next thing on the horizon is the weakening of local retail,” adding that he believes the shakeout will take place in the first six months of this year. The problem is retail center owners who overleveraged and can’t service their debt. Mall owner General Growth Properties, for example, warned in November of a possible bankruptcy filing because of its inability to finance debt to meet short-term cash needs for its properties, which includes Mizner Park in Boca Raton, Regency Square Mall in Jacksonville and 14 other Florida retail centers.

“Owners of centers are scrambling,” says Berman. “2009 is going to be a major transitioning year.”

Berman says that out-of-state buyers and private equity firms are still doing deals for retail centers in prime locations. He says Miami-Dade County as well as tourist areas of Orlando and Fort Lauderdale are strong while retail centers in suburban areas in many parts of the state are struggling in large part because of the housing downturn.

“Retailers used to be on major corridors. Everybody drove past them,” says Geneva P. Henderson, executive vice president for commercial real estate firm Lat Purser & Associates in Jacksonville. But in recent years, retail centers have been built in out-of-the-way locations near new residential developments that are now dotted with vacant homes. “Retailers overexpanded,” says economist Hank Fishkind, president of Fishkind & Associates in Orlando. He doesn’t expect a bounce back in retail until Florida’s population growth rebounds, which he says will be in 2010 at the earliest. But retail centers that were in the works before the recession will continue to come online, he says. “In 2009, we’re going to have more retail delivery,” warns Fishkind. “This is only going to get worse.”