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When prized tenant leaves shopping center, other retailers suffer

After 20 years in the same St. Petersburg shopping center, Kathleen's Expert Alterations struggled through the recession.

But once the Publix a few doors down left for a new center a half-mile away last June, her customer traffic dropped by half.

"It was like somebody turned off the faucet," said Kathleen Mattea, a shop owner who never realized how much of her trade, directly across 22nd Avenue N from dozens of clothing stores in Tyrone Square Mall, was really driven by proximity to a popular supermarket.

She had to lay off a clerk, cut three part-timers and pare hours for employees.

Her tale shows how recession and restrained consumer spending are not the only forces driving a rising shopping center vacancy rate in Florida. Landlords are paying for the sins of overbuilding. Retailers left to cope with surrounding vacant storefronts are often stuck in a center that emerges with a radically altered business model — even after empty space is filled.

It has made for some of the testiest relations in years between store owners demanding rent reductions and landlords trying to make mortgage payments every time a major drawing card goes dark.

The most successful shopping centers are designed to have many moving parts so like tenants feed off one another's traffic. So when a grocery store that's busy day and night is cut in pieces for a restaurant, insurance office or a gym, the parking lot will fill with different types of customers at different times of the day and doom what had been some prosperous businesses.

That's why in retail real estate, vacancy often breeds more vacancy. Accelerating the trend: so-called "co-tenancy" escape clauses that many chains tuck into leases to protect them if the retail neighbors they want abandon ship. When a named store leaves, the other "birds of a feather" retailers can automatically break leases or pay cheaper rent.

With the retail vacancy rate at a two-decade high of 10.5 percent, many Tampa Bay neighborhood center owners are restocking with offices, service providers, medical facilities, churches and schools.

"We're back to basics, cold-calling every community group, church or business within 2 miles to see if we can fill a need," said John Crossman, president of Crossman & Co., which leases space in more than 100 shopping centers controlled by Publix.

"Center landlords love national chains, but in times like this, the hidden gems are local retailers with a couple of stores who might be interested in one more," said Beth Azor, president of Fort Lauderdale-based Azor Advisory Services.

Critics blame Walmart for wiping out local shopkeepers, but it's really all big-box stores.

Once, for instance, the typical grocery store shared a shopping center with a newsstand, a drugstore, a florist, a card shop, a liquor store and a takeout food shop or two. Today, all are aisles inside a supermarket.

"It's made us more creative filling grocery-anchored centers," said Lee Arnold, chief executive of Colliers Arnold.

Mark Albright can be reached at or (727) 893-8252.

When prized tenant leaves shopping center, other retailers suffer 03/15/10 [Last modified: Monday, March 15, 2010 7:43pm]
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