Bargain retail lifts U.S. shopping centers as big names stumble

Workers prepare a new Ross store which is opening soon in Broomfield, Colo., in this  photo taken last month.  Credit: Reuters/Rick Wilking/Files
Workers prepare a new Ross store in Broomfield, Colo., in this photo taken last month.
Credit: Reuters/Rick Wilking/Files

Bargain store chains are flooding into North American malls and shopping centers like never before, upstaging old mainstays like J.C. Penney and Sears that are reeling from the one-two punch of an ailing economy and competition from online stores.

“We’re seeing a seismic shift in retail shopping centers,” said Garrick Brown, director of research at real estate firm Cassidy Turley. “The challenges of the weak economy are being replaced by the challenges of e-commerce.”

The shift may reflect some consumer pain, but it has brought plenty of winners, too. Commercial real estate rents are rising, and many retailers, especially bargain chains, are in better shape than they have been since the Great Recession in 2008, analysts say. Shopping center vacancy rates in 60 major U.S. markets fell to 8.6 percent at the end of last year from 9.5 percent a year earlier, reflecting 38 million square feet of occupancy growth, according to Cassidy Turley research.

As a result, price appreciation among retail assets led all commercial property types in 2013, rising 23 percent, according to Moodys/RCA CPPI.

J.C. Penney Co Inc and Sears Holding Corp are retrenching and fighting for survival, raising a red flag for malls where, as anchor tenants, they draw foot traffic to nearby smaller stores.

Meanwhile, Staples Inc and RadioShack Corp earlier this month hit the U.S. commercial real estate market with plans to close a combined 1,325 stores. Analysts said they were slow to react to declining foot traffic and the surging amount of consumer shopping moving to the Internet.

U.S. shopping center owners say they have had no reason for alarm. With new retail construction at historically low levels, they are getting help from a stable of discount retailers. Costco Wholesale Corp, T.J. Maxx, Marshalls, Dollar General, Nordstrom Rack and Ross Stores have been quick to fill vacancies.

Many of those stores are in great shape. Shares of bargain chain operators TJX Companies Inc and Dollar General Corp have risen 36 percent and 19 percent, respectively, over the past year as they open stores at a rapid clip.

The top five Dollar store brands together have opened an average 2,000 new stores each of the past three years with similar growth plans for this year, according to researchers at Cassidy Turley.

“Dollar stores have just had insane, insane levels of new growth,” Brown said. Dollar General has more than 11,000 stores, with plans to open several hundred more in 2014. The chain has more stores than RadioShack and Staples combined, which have about 4,300 and 1,900, respectively.

“I see a lot of companies interested in the space that Staples would be exiting,” said Peter Dixon, who runs the $1.1 billion Fidelity Select Retailing Portfolio. The fund’s 1-year return of 30.37 percent beats 96 percent of peers while trouncing its benchmark by 12.5 percentage points, according to Morningstar Inc data.

Senior executives at Kimco Realty Corp agree with Dixon’s assessment. Kimco, North America’s largest owner and operator of neighborhood and community shopping centers, says it can absorb hits from consolidation in the office supply industry by signing up tenants such as T.J. Maxx and Marshalls, and specialty grocer Sprouts, for example.

TJX Cos, owner of T.J. Maxx and Marshalls and the operator of 3,200 stores, said cash outflows for property additions totaled $759 million for the nine months that ended November 2. Capital spending plans for fiscal 2014 will amount to as much as $950 million, compared to J.C. Penney’s plan for about $300 million, according to their financial reports.

Kimco Chief Executive Dave Henry recently told analysts and investors at a Citi property conference that new store openings are at a five-year high.

“So even as these retailers consolidate, the demand for these bigger box (spaces) is good and strong, and rents are beginning to jump,” Henry said at the March 3 conference.

In 2013 nearly 10,500 new retail stores opened, compared with about 2,600 closures, according to Factset research.

 



News
Entertainment
Sports
Lifestyle
Local

Brooklyn man charged in roommate's stabbing death

A Brooklyn man accused of violently stabbing his roommate to death on Monday is in police custody and faces murder charges.

International

Dinosaurs could have survived asteroid strike

It turns out there is a good and a bad time for the planet to be hit by a meteor, and dinosaurs were just unlucky.…

National

OkCupid admits to Facebook-style experimenting on customers

By Sarah McBrideSAN FRANCISCO (Reuters) - OkCupid, a top U.S. matchmaking website, intentionally mismatched users to test its technology, the IAC/InterActive Corp service said on…

Local

MTA fares still increasing 4 percent in newly…

The agency said the 4 percent increases, previously announced in December, will remain steady even as the MTA deals with increasing labor costs.

Movies

Interview: Brendan Gleeson on the way 'Calvary' depicts…

Brendan Gleeson talks about how his new film "Calvary" began over drinks and how his character here is the opposite of the lead in "The Guard."

Movies

'Get on Up' producer Mick Jagger on the…

Mick Jagger, a producer on the James Brown biopic "Get on Up," talks about the time had to tell the singer some bad news and his favorite JB record.

Television

'Glee' star Lea Michele to appear on 'Sons…

"Glee" star Lea Michele has been confirmed as a guest star in the final season of "Sons of Anarchy."

Television

TV watch list, Monday, July 28: 'The Bachelorette'…

See Andi Dorfman make her big choice on tonight's 'Bachelorette' finale.

MLB

Angelo Cataldi: Ryan Howard deserves better from Phillies

Just last week, Ryan Howard endured the embarrassment of a benching that was inevitable, and yet still shocking.

NFL

Larry Donnell has inside track in Giants tight…

Little-known Larry Donnell of Grambling State currently has the inside track, as the second-year player has received the bulk of the first-team reps.

NFL

Computer to Jets: Start Michael Vick over Geno…

Jets general manager John Idzik says the choice of who starts between second-year quarterback Geno Smith and veteran Michael Vick will be a “Jets decision.”

MLB

Yankees looking to trade for Josh Willingham: Report

CBS Sports’ Jon Heyman reported Sunday the Yankees are interested in Twins outfielder Josh Willingham.

Travel

Glasgow: Hey, hey, the gangs aren't here

This European city has done a good job getting rid of its more violent residents and revitalizing with artists.

Education

Babson College tops list of best colleges for…

Money magazine has just released its inaugural list of "The Best Colleges for Your Money" -- and the answers have surprised many. Babson College, which…

Education

NYC teens learn how to develop apps during…

Through a program sponsored by CampInteractive, the high schoolers designed their own community-focused apps.

Tech

The Ministry of Silly Walks app is both…

Monty Python have dug into their back catalogue for cash-ins once more, but with the Ministry of Silly Walks app, they've made something that's fun too.