"It's been bad," said Thomas S. Saquella, executive director of the Maryland Retailers Association, who joined the trade group in 1985. "It's the worst period we've ever had since I've been with the retail association."
The multiple closings and bankruptcies of national retailers and restaurants have left many shopping centers and shopping malls with empty storefronts.
"If you're a mall owner or a shopping center owner, or any retailer, you're depending on those anchor stores to bring customers to your door," Saquella said. "It sends an awful message to the customers. Retailers do not like to see empty storefronts wherever they're located. If you walk into a shopping center and of the first 20 stores, there were two or three closed, you'd think something was wrong with the shopping center. It sends a bad vibe to their customers."
Not everyone is as downbeat as Saquella.
Steven P. Laposa, director of the Everitt Real Estate Center at Colorado State University's College of Business, said that while the retail sector's woes appear broad, things have not been as bad as they could be.
"If you take a look at the retailers that have gone under, some only have a small footprint," Laposa said.
That's not much consolation to Saquella.
While retailers have seen slumps before, Saquella is pessimistic that so many factors are involved in the current slowdown — from falling consumer confidence to high gasoline prices and the credit crunch experienced by businesses and consumers — that he does not expect a rebound any time soon.
"I don't see any light at the end of the tunnel right now," Saquella said. "We hope things are going to turn around. Nothing is happening that is going to make the economy turn around like we'd like to see it."
In the spring of 2007, as the housing market began to tank and gas prices went up, shoppers became more frugal, Saquella said.
The effect was really felt during last year's holiday season, Saquella said. Holiday sales in Maryland were down nearly 8 percent.
"We'd never had holiday sales down before," he said. "We've had years where there was only an increase of 1 percent, where it was flat. But we never had them go down."
Impact muted in Maryland
But despite all of the "doom and gloom" over the retail bankruptcies, the impact in the region was muted in Maryland, according to CoStar Group Inc. of Bethesda, a leading provider of information and marketing services to the commercial real estate industry.
In the Washington region, which includes Montgomery and Prince George's counties, the overall retail vacancy rate increased from 3.9 percent to 4.1 percent from the first quarter to the second quarter of this year, according to CoStar Group.
The vacancy rate in Baltimore actually declined, from 5.3 percent to 4.8 percent.
Real estate investment trusts are not being hurt as much by the higher vacancy rates for shopping centers and malls as might be expected, Laposa said.
"They're pretty smart people and are still doing well," Laposa said of REITs. "It's not all doom and gloom out there. When Americans feel better they'll go out shopping gain."
Federal Realty Investment Trust of Rockville, which owns retail properties throughout the region, reported income increased in the second quarter 4.1 percent. Its leased property rate had dropped slightly to 95.8 percent from 96.1 percent in the same period last year.
"The performance of our portfolio reflects continued demand by tenants for high quality assets in our strong retail locations, despite the inevitable impact of these difficult economic conditions," said Donald C. Wood, president and CEO of Federal Realty, in a statement.
Laposa blamed the retail slump on consumers shelling out more at the gas pumps.
"Gasoline takes up a lot of discretionary spending right now," Laposa said.
Saquella agreed and said shoppers are feeling the pinch.
The largest segment of the retail industry is aimed at the middle class and that appears to be the segment being hit hardest, however, Saquella said.
"The high-end stores are still insulated, but that's changing as well," he said. "The only stores doing better are a Wal-Mart or a Costco. Your middle shoppers are migrating now to discount."
Even the wealthier counties in Maryland are showing signs of the retail slump, Saquella said.
"Everyone is off," he said. "Montgomery County will do better than Allegany County any time, but I haven't heard of any region doing well. Everyone is hurting."
Shopping centers in Bethesda-Chevy Chase are averaging a 4.6 percent vacancy rate; in Frederick it's 9.9 percent; in northern Prince George's County, it's 9.3 percent; and in Baltimore it's 6.7 percent.
Saquella blames the retail woes in part on this year's 20 percent increase in the sales tax, which rose from 5 percent to 6 percent on Jan. 1.
"You don't raise taxes when the economy slows down, but the legislature felt they had to do it to get the budget balanced," Saquella said.
Malls are being left with empty storefronts as anchor stores and restaurants close.
