Space for rent and plenty of it

Not since “Psycho” have so many ‘vacancy’ signs been so scary.

That’s because nothing quite says “stagnant economy” like darkened storefronts, empty offices and idle industrial sites. Driving around my neck of the woods, it’s often a toss-up as to whether the viable business marquees outnumber the “For Sale or Lease” signs on commercial real estate.

Even as the residential housing market shows some signs of stabilization, observers say the commercial crisis has yet to reach full bloom – making it fertile ground for your reporting this fall.

Richard Parkus, an oft-cited Deutsche Bank analyst, told Congress in July that he predicts up to $90 billion in commercial mortgage losses, with default rates the highest on recent loans. His speech (pdf document) is a good primer if you’re new to non-residential real-estate coverage.

Just this week, the Treasury Department modified refinancing rules for some types of commercial mortgages; the easing of tax penalties is an attempt to stave off defaults that might be prevented by refis.

The retail numbers alone are staggering. Wednesday, Blockbuster Inc. said it expects to close up to 650 stores by year-end, with as many as 285 on the chopping block in 2010. Those cast-off outlets will join legions of other recently failed merchants, from Circuit City to Bombay Co. to Linens ‘N Things.

In all, some 10,000 retail outlets may be shuttered this year, according to a consulting firm report cited in Progressive Grocer magazine, a Nielsen Business Media publication. This is well worth an e-mail sign-up, by the way, for anyone on the retail, economy, real estate and development beats.

Note that the store closings affect landlords at properties ranging from tiny neighborhood strips to large big-box oriented power centers to traditional enclosed malls; each format would make a compelling angle for a vacancy package. Be sure to talk with nearby firms and merchants about what those gap-toothed shopping centers do to undercut traffic at their still-viable companies.

I’ve noticed a number of attempts to camouflage vacant stores with murals, showcases, community information and more – that alone would make for a picturesque and readable business feature.

And the numbers above don’t even count obsolete offices and manufacturing sites, from the city-sized automotive plants to defunct light industrial compounds and obsolete mom-and-pop shops like the cardboard box factory that used to clatter and whir a few blocks away from my office.

The Federal Reserve Beige Book released Sept. 9 includes anecdotal information confirming that commercial real estate activity is weak, with some landlords making rent concessions and postponing property improvements to offset high vacancy rates. Read beyond the summary for specifics on your region and give the analysts a ring; they might be able to provide more quantitative data.

Vacancy statistics are hard to come by, because they’re gathered mostly in proprietary reports by consulting firms that turn a dime selling the info within the industry. Depending on your approach, some, like giants Reis Inc. and CB Richard Ellis, may be willing to share selections from their reports or at least point you in the right direction.

Either way, their Web sites are great sources of industry background. Local developers and brokers – get their names right off the “For Lease” signage – may also maintain their own indices and databanks. And don’t overlook local bankers for insight into the real-estate realm.

Other sites you’ll want to hit:

The Real Estate Roundtable, a lobbying firm with vast resources and factoids on its site.
The National Retail Federation and the International Council of Shopping Centers, each of which monitors retail development and vacancies
Retail Traffic Magazine

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