Making An Exit

Top-shelf Stores Trickle Out Of Harbor Retail Hub Catering To Tourists, Workers

July 14, 2009|By Andrea K. Walker | Andrea K. Walker,

First White House Black Market closed its flagship clothing store in February. Shortly after, the Aveda beauty store and J. Crew declined to renew their leases and moved out. And then Origins also closed its store.

The Harborplace & The Gallery shopping complex at Baltimore's Inner Harbor has been losing some of its highest-profile tenants as the recession has driven retailers to downsize and close underperforming stores to deal with a drop in consumer spending.

The economic climate is hitting shopping centers all across the country, but downtown areas like Baltimore, where retailers tend to have smaller, less profitable stores, can be harder hit and more vulnerable than larger suburban malls during slow economic times like these, retail experts said.

Downtown Baltimore shopping is challenging even during good times because it is dependent on tourism and downtown office workers who go home on weekends and in the evenings, said William P. Ferrell, a principal with Trout Daniel & Associates commercial real estate brokerage in Baltimore. A store like a J. Crew might not make as much money in The Gallery as in a suburban mall, Ferrell said.

"Really, people from outside of downtown don't shop there except for the specialty stores," Ferrell said. "Joe Blow from Chicago has J. Crew down the street at home so there's not a reason for them to shop there. That mall is always going to have challenges."

General Growth Properties Inc., the Chicago-based mall owner that is operating under bankruptcy-law protection, is known for running its properties well, and its problems stem more from debt than from the quality of its malls, retail experts said.

"I think everyone understands that the malls themselves, which generally are top-rated, are going to be there," said Howard Davidowitz, chairman of Davidowitz & Associates, a retail brokerage and consulting firm in New York. "The creditors are not going to be crazy enough to destroy the value of the malls."

The vacancy rate at The Gallery & Harborplace has grown to 6.8 percent in June, up significantly from 1.5 percent the second quarter of last year, according to research firm Costar Group. Arundel Mills in Hanover has a 1.2 percent vacancy rate, while Towson Town Center has a 7 percent vacancy rate. Towson just opened a new luxury wing that may be skewing the numbers.

White House Black Market - which sells only clothes that are black, white or off white - closed its store at Harborplace in February even though it was the original location that had been there since 1985. The store was half the size of most of its other locations and didn't do as much business as the company would have liked. Executives were also unhappy that General Growth wasn't spending to upgrade the facilities, said Robert Atkinson, a spokesman for the White House chain, which is now owned by Florida-based Chico's.

"That was a pretty tough decision for us because that was kind of a legacy store for us," Atkinson said of the chain. "As you know, there are financial issues that General Growth is facing. They weren't refurbishing the complex. From a financial standpoint it wasn't a profitable store for us."

The stores are closing as retailers face their toughest economic climate in years, with many consumers cutting out discretionary spending. Retailers might have hung onto stores that didn't quite meet their expectations in the past, but are now downsizing them instead. Stores such as Ann Taylor have announced plans to close some of their locations. Abercrombie & Fitch said last month it was closing its money-losing Ruehl chain.

General Growth has been desperately trying to sell off properties, including Harborplace & The Gallery and Cross Keys in Northeast Baltimore, to raise cash to pay off huge amounts of debt. The Cross Keys location recently lost Ann Taylor and J. Jill stores.

The general manager at Harborplace & The Gallery said the bankruptcy hasn't had an impact on leasing.

"As far as anything new on the bankruptcy and its impact on leasing our properties, we have seen none," Christopher S. Schardt, senior general manager at Harborplace & The Gallery, said in an e-mailed response. "We continue signing new retailers to many of our properties across the portfolio. We're in talks with retailers on a daily basis. This is true for Harborplace & The Gallery. So, in short, our bankruptcy has not impacted our relationships with our retailers."

He blamed the empty storefronts on retailers downsizing because of the economic climate.

"Just about every industry is feeling the impact of our country's recession," Schardt said.

The shopping center is made up of three buildings, including two Harborplace pavilions. The Gallery mall has a 5.7 percent vacancy rate, according to CoStar Group. The Harborplace building at 301 Light St, which is primarily restaurants, has an 8.3 percent vacancy rate, while the building at 201 E. Pratt Street has a 7.4 percent vacancy rate.

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