Store closing tsunami? Seriously?

02-Oct-2014

Store closing tsunami? Seriously?

Did you happen to read “Is a Store Closing Tsunami Ahead?” in National Real Estate Investor last week? The article discusses the
increase in store closings in 2014 and predicts that number will accelerate through 2015.

Citing ICSC and PNC Real Estate Research, the number of retail and restaurant closing announcements in the second quarter
of 2014 increased by nearly 2.5 times over the prior year with a total of 1900 closings totaling an estimated 21.1 million square feet.
Neill Kelly, president of DJM Real Estate, a Gordon Brothers Group Company, is quoted as saying he expects stores closings to
continue to pick up in 2015.

The article was focused primarily on chain stores and how they have not yet recovered from the recession and their sometimes
difficult transition to effective omnichannel retailing. The phrases “underperforming”, “cash-strapped” and “difficulty maintaining
foot traffic” were bandied about in the article.

So here’s the question. If the big guys, with all their professional staffs and teams of experts, are having trouble navigating
the post-recession economy, finding it difficult to manage cash flow, right-sizing and product mix and integrating ecommerce,
why is everyone so ready to believe small tenants are over the hump?  

Large companies have the resources to buy them time to figure out how to evolve and move forward. The little guys – well,
they’ve got nothing: a lease, some inventory and hopefully, some savvy. That’s it. A simple sales vs. rent ratio analysis will
probably show that a disproportionate number of your small shops and restaurants are dangerously out of whack.

Small business is not simply a smaller version of big business. They have their own issues, nuances and challenges,
not the least of which is lack of access to professional guidance. The 70+ hour work weeks of these owners make time for
education and for forward thinking almost non-existent.

As an advocate for small business, it’s hard to watch them struggle and be told “they should be doing better.” Yes, they should.
And they can. But not without some help and nurturing. If they don’t get it, we all need to prepare for the storm.
 


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