Retail Feels One-Two Punch of Consolidation and E-Commerce

Retail can be a tricky commercial real estate sector. The best mall REITs are in terrific shape financially, yet the United States has vacant malls scattered across its landscape. Retailers’ sales, for the most part, have been in a pretty good place since the darkest days of the recession, but the uncertain economy has consumers constantly weary—and wary—about the future. A lot of retailers have stepped up their expansion plans, though several big chains, like Borders, Blockbuster and Circuit City have essentially gone out of business. Companies are boosting their bottom lines, in part, from online sales, and they’re merging with one another to become even more competitive.

A perfect example of this is the pending merger between Office Depot and OfficeMax. Both companies have lagged behind office-products leader Staples and seen their sales decline as competition has increased from the Internet and mass-merchandise retailers. Retail industry observers concur that the combined chains will lead to a better-performing entity, but the bad news for those who own shopping centers is store closures. At press time, there was no official word on how many stores will close, but the number 600 was kicked around in several articles.