Shopping center owners should brace themselves becuase things are going to get ugly if a proposed merger between OfficeMax and Office Depot takes place. Several store closures are sure to be on the horizon.
Hopefully, this merger isn't catching anyone who owns a center with either tenant off guard. Staples has been on top of the office-products area for a long time, and players like Walmart and Target have much of what most people need who are shopping for these items.
In addition, we have entered an age where each big-box retail category increasingly only has one dominant national player. We saw this with Linens 'n Things, Circuit City and Borders. Industry observers have long pointed out that three big-box chains in the office-supplies space is too many.
Plus, there is overlap between where the OfficeMax and Depot have locations -- well over 2,500 between the two of them. And if a merger does take place, this is where the store closings will come in.
So now there are two very important questions if the merger takes place. How many stores will the combined entity close? When those closures take place is there sufficient demand to fill the vacancies?
It seems like it has been difficult enough to fill the Linens, Circuit City's and Borders out there, so this is the last thing that landlords probably want to deal with. But is there any upside to this? Will they be able to find a stronger tenant to replace these lagging chains?
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