HomeBase Closures a Warning for Retail Investors

LOS ANGELES-The decision by home-improvement giant HomeBase Inc. to close 22 of its stores and convert 62 others to home-furniture outlets is a warning sign for retail-property investors and a sobering reminder than even California’s red-hot economy may be slowing, experts tell GlobeSt.com.By exiting the increasingly cutthroat HI business, HomeBase officials did “exactly what they needed to do,” says Howard Rosencrans, an analyst who follows the industry for HD Brous & Co. in New York. “The chain was not viable, and it was not going to be viable.”

Many HomeBase stores have already been padlocked in the wake of the company’s Tuesday announcement that it would permanently close 22 of its stores and convert 62 others to House2Home stores. The company’s House2Home concept, in which everything from furniture to wallpaper is sold under the same giant roof, made its debut at a handful of Southern California locations earlier this year.

Though HomeBase’s withdrawal is the first major casualty of the nation’s fierce war between home-improvement stores, most experts agree that it won’t be the last. Despite signs that the HI industry’s revenue growth is slowing, most of the nation’s home-improvement chains–often anchor tenants in new retail projects–continue to open stores at a fevered pitch.