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With so many retailers filing for bankruptcy or deciding to shutter a chunk of their stores, it seems like Halloween specialty shops should have an abundance of choices for where to put their seasonal pop-ups.
Yet despite these headlines, retail vacancies are trending lower and rents are moving higher, making 2016 more challenging for companies like Halloween City when they scope out their annual locations.
In addition to tighter supply, the space that is on the market often doesn't meet these retailers' criteria. Store closures have skewed toward regional malls, which have been largely untapped by Halloween stores, said Garrick Brown, a vice president of retail research at Cushman & Wakefield.
In contrast, the off-mall shopping centers that Halloween retailers prefer are some of the strongest-performing properties, Brown said. Their tenant lists favor off-price retailers, grocery stores and services, which are widely considered more resistant to e-commerce.
"The guys that are closing [stores], I think that news is overshadowing where the growth is occurring," Brown said.
Overall shopping center vacancies in the U.S. stood at 7.6 percent at the end of the second quarter, down from 8.1 percent a year prior, according to Cushman's data. The numbers are flattered by the fact that that many soon-to-be-empty storefronts haven't yet been vacated. Yet that caveat hasn't made space any easier to come by for seasonal retailers, who adhere to certain qualifications when selecting their locations.
There are roughly 3,900 empty spaces in the U.S. that fall within the ideal size for Halloween stores, at 25,000 to 50,000 square feet, Brown said. But consider that retailers prefer space outside of primary shopping centers, where rent is more affordable. They also want some 35,000 people to live in a five-mile radius. Those factors bring the number of attractive locations to about 1,800, Brown said.
And with roughly 2,000 of these shops opening across the country each year, it "makes a lot of sense" that retailers are running into trouble, Brown said.
Party City is dialing back its Halloween City footprint from 333 stores last year, to roughly 275 in 2016. While part of that decision was because the holiday shifted from the weekend to a workday, it was also a function of real estate, CEO Jim Harrison said.
"The important thing about the temporary stores is really visibility," Harrison said. "You've got very little time to develop any sort of awareness."
Privately-held Spirit Halloween declined to share details about the market for available space. However, spokeswoman Trisha Lombardo said it will open more than 1,200 shops across strip centers and malls this year. That's up from 1,165 last year.
Lombardo listed Sports Authority and Hancock Fabrics as two tenants its shops are replacing. Spirit Halloween also fills spaces left empty by drug, office supply, grocery and book stores, she said.
Spirit tends to be more aggressive with its pop-up locations out of necessity, Brown said. Unlike Party City, it doesn't have some 900 stores that are open year-round.
"Their model is a little bit different," Brown said.
When Halloween retailers do find space, they're having to shell out more to secure it, Brown said. Because landlords would always prefer a long-term tenant, the three-month leases typical of these seasonal shops come at a premium. Whereas a 30,000-square-foot shop in a decent Sacramento, California, center would cost roughly $18 a foot annually, that number doubles for a pop-up shop, Brown said.
And because space is tighter, the cost is also up compared with last year. The average asking rent for retail space in the U.S. was $26.64 a square foot in the second quarter, up from $24.81 a year earlier, according to Cushman's data.
Certain markets are tougher than others. While there are few vacant spaces in Hawaii, landlords in Indianapolis, Indiana, would greet these pop-up stores with "open arms," Brown said.
"It's really about necessity," he said.
Brown expects the market to loosen up next year, when more Sports Authority locations come online, Halloween shops take regional malls into consideration, and more retailers announce plans to close stores.
"More and more of these things are going to hit," he said.