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Eerily Empty Malls Are a Treat for Halloween Pop-Up Stores

Jessica Rao,|Special to CNBC.com
Friday, 21 Oct 2011 | 4:06 PM ET

It wasn’t long ago that Halloween shopping meant grabbing a pumpkin and a few bags of candy at the supermarket.

Source: Halloween City

Today, temporary stores specializing in the holiday are everywhere — sometimes two in a suburban strip or city block. During September and October, the stores are an experience unto themselves, offering costumes for all ages, decor and special effects.

Strong consumer interest is driving the growth, but high retail vacancy rates and landlords’ newfound willingness to take on short-term tenants are also behind the surge.

IBIS World, a research firm in Santa Monica, Calif., estimates the number of Halloween pop-up stores has grown 8 percent a year since 2005. In 2010, growth jumped to 15 percent, after large operators like Circuit City and Linens ‘n Things went out of business, says IBIS analyst Nikoleta Panteva. The same year, large operators even set foot into Manhattan, which is an expensive and difficult market to break into, she adds.

Chuck Lanyard, president of The Goldstein Group, a retail real estate brokerage in Paramus, N.J., agrees that more vacancies mean more seasonal pop-ups.

“Landlords have an opportunity to grab some cash to cover the cost of carrying an empty building such as taxes, maintenance and utilities,” says Lanyard. High-traffic locations can rent for as much as $60,000 for a two-month period.

According to Reis, a provider of commercial real estate market information in New York City, the national vacancy rate for neighborhood and community shopping centers has risen from 7.5 percent in the fourth quarter of 2007 to 11 percent in the third quarter of 2011.

In years past, when the economy was better, landlords didn’t want the stigma of renting to short-term tenants. On the contrary, says Christina Norsig, CEO of PopUpInsider, a company that helps merchants find temporary retail space, pop-ups make locations more attractive.

“There’s nothing like seeing lights on and activity," says Norsig. "You can envision your store there and that is one of the things that is often overlooked by landlords.”

The Halloween tenants themselves have also changed. In years past, Lanyard says they left the properties in terrible condition and would sometimes stiff on the rent. Nowadays, the major players are big corporations, who pay the rent up front and leave spaces spotless.

The current market leader is Spirit Halloween, a business that started in San Francisco in 1983 as an entrepreneurial venture and was acquired by Spencer Gifts in the late 90s. Spirit ballooned from approximately 130 stores in 2003 to 970 in 2011.

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Halloween City, a division of Party Cityand another major player, grew from 106 stores in 2008 to more than 400 stores today. Donny Rose, Halloween City's director of marketing, adds that the company will hire more than 10,000 temporary employees throughout this year's season.

While the numbers are fantastic, it’s natural to wonder how these places are viable the rest of the year. The answer, says Spirit CEO Steven Silverstein, is a new business model that involves being physically present for two months, and uses the rest of the year to plan and project.

“We’re doing all the things to prepare for the big event," says Silverstein. "It is not too dissimilar to managing the Super Bowl or running a circus or something of that nature. The rest of the year we are planning and managing the process to get ready for the Halloween season.”

The pop-up store model is by no means limited to Halloween. In fact, Christmas is the major holiday market. Stores also pop up for Valentine's Day, Mother's Day, and the Super Bowl.

Norsig is also seeing online merchants like getting into the game, as well as big name publications seeking to create a physical presence for their titles, while retailers are experimenting with the concept. Target’s "Missioni for Target" collection, which used a pop-up store in New York City, was tremendously successful earlier this year.

Pop-up stores are part of the temporary retail market, which also includes flash retailers, carts, kiosks and other special situations, an $8 billion business in 2010, according to Patricia Norins, Publisher of Specialty Retail Report.

“It’s no longer seasonal," says Norsig. "Temporary stores are becoming a permanent part of our retail distribution. It’s a faster-paced retail environment and a way to get consumers excited about the products."

The big question is, down the road, when the economy is hopefully healthier, will there be less opportunity? Yes, says Lanyard, due to the fact that less space will be available.

Nevertheless, the Halloween merchants have something else going for them; their prime time is before the Christmas rush. Most retailers aren’t looking to get into new spaces before November.

Their other advantage is the depth and breadth of their inventory and the choices it offers consumers.

In September, Norins, the publisher, took her 9-year old daughter to Spirit Halloween for her vampire costume. Not only were the two amazed at the 10 different kinds of vampire teeth and wigs from which to choose, but, says Norins, her daughter was mesmerized.

“She didn’t even want to leave the store," says Norins. "It was so experiential.”

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