With a rash of big-box closings, the retail occupancy rate in the Columbia area dipped below 90 percent for the first time in roughly a decade in 2009, falling to 88 percent, according to two new reports.
Mom-and-pop retailers held on by negotiating for lower rents, the year-end retail report from Columbia's Colliers Keenan commercial real estate firm said.
Going into 2010, the market is set to stabilize, but don't expect growth until sometime in 2011, the report says.
Most of the big-box stores that were in trouble have closed or reorganized, said Rox Pollard, manager of Colliers Keenan's retail services group.
"If they've been able to hang on this long and adjust their business model ... they're probably likely to make it going forward," he said.
National retailers - such as Circuit City, Sofa Express, Goody's and Ashley Home Furniture - facing bankruptcy and poor sales after a harsh holiday shopping season in 2008 in the midst of a brutal recession closed stores throughout the Midlands this year.
In total, they vacated nearly 367,000 square feet of retail space, about 3 percent of the entire Columbia market, according to the Colliers Keenan report.
Commercial real estate firm NAI Avant also recently released a report showing the occupancy rate fell to at least an eight-year low.
"We definitely have a lot of vacancy, more than we've had in a long time," said Ron Anderson, vice president of research and technology for NAI Avant.
Retailers who survived the two-year recession are likely to be stronger heading into the new year, said Charlie Gwinn, general manager of Columbia Place Mall, which lost several anchors in 2009, including Dillard's, Steve & Barry's and Old Navy.
Gwinn said he already is in negotiations to fill some of those large empty spaces in the Two Notch Road mall. "There's already activity on the site that wasn't there a year ago," he said.
But some smaller retailers who were "just hanging on through Christmas" still could shut their doors in the first half of the new year, Pollard said.
Local merchants and discount retailers, such as Dollar General, TJ Maxx and Target, thrived in 2009 as shoppers looked to save money on essential items during the economic downturn.
Wal-Mart even opened a new store in the Ballentine and Irmo area last year, making up the bulk of the additional 481,000 square feet of retail space added to the market in 2009, according to another report by NAI Avant.
Many of the local merchants were able to stay in business by negotiating for lower rents or stopping rate increases, Pollard said.
"There has not been an across-the-board reduction in rates," he said. But he estimated landlords were reducing rent for limited periods between 10 percent and 20 percent to hang on to tenants in an uncertain economy.
The NAI Avant report estimated rent reductions went as high as 30 percent and said the most stable rates were in WalMart- and Target-anchored shopping centers.
The hardest hit area in the Midlands, according to the Colliers Keenan report, was the Cayce/West Columbia market, which finished the year with an 83 percent occupancy rate, nearly 5 percentage points lower than last year and the worst rate in the Midlands.
Lexington was the strongest market for retailers in the Midlands in 2009, ending the year with a nearly 98 percent occupancy rate. Northeast Richland remained relatively flat at 86 percent.
Look for a brighter 2010.
"By mid-year, we will start to be able to recognize the recovery," Gwinn said. "Right now, people are talking about it, but it's not visible."
Retail occupancy rates dipped in most areas in the Midlands in 2009 as a brutal two-year recession came to a close. Here's a look:
Entire Columbia market
SOURCE: Colliers Keenan