Call it a grim holiday present for shopping center operators.

By early next year, three large retailers will shutter and dump some two million square feet of retail space on the Los Angeles market, with the prospect of more closings to follow what's likely to be a sour holiday shopping season.

The recent announcements by Mervyn's LLC, Linens 'n Things Inc. and local retailer Shoe Pavilion Inc. that they were entering bankruptcy and liquidating are expected to hit many local shopping centers hard at a time when sales are slumping.

Retail analysts say the size of the spaces coming on line also will make it tough for landlords to fill them, especially for Hayward-based Mervyn's, by far the biggest of the three chains. The average size of a Mervyn's store is 80,000 square feet, too small for many mall anchors and too big for most other retail stores.

Linens 'n Things, based in Clifton, N.J., has stores that average 35,000 square feet, while stores operated by Sherman Oaks-based Shoe Pavilion average 15,000 square feet. Those sizes are more attractive to the many small and mid-sized retail players, but in the rapidly worsening retail environment mall operators are now looking at splitting these spaces to try to get anybody in the door.

"There's definitely going to be some pain here for a lot of shopping center properties," said Gregory Stoffel, a retail strategist and principal of Irvine-based Gregory Stoffel & Associates.

Significant addition

As of mid-year, the three retailers' locations made up roughly 3 percent of Los Angeles County's total retail square footage. At that time, Mervyn's had 18 stores in L.A. County, Shoe Pavilion 23 and Linens 'n Things seven. Since then, several of these stores have closed.

As the liquidations continue, they will add significantly to the county's third-quarter vacancy rate of 3.9 percent, which is already at the highest level in six years, according to data from Reis Inc., a New York City consultancy. If other closings occur, the county's retail vacancy rate could nearly double.

L.A. County's retail vacancy rate is lower than the rates in Ventura, San Bernardino and Riverside counties, but many expect it to rise rapidly with another wave of bankruptcy filings after the holidays. Analysts say that much of L.A. County has too much retail, the result of developers welcomed by communities seeking additional sales tax dollars.

Los Angeles-area malls that count more than one of the three liquidating retailers as tenants are going to be the most affected. Janss Marketplace in Thousand Oaks has all three retailers as tenants, accounting for nearly a third of the center's total 455,000 square feet.

"Lucky us, huh?" said Sandy Sigal, chief executive of property manager NewMark Merril Cos. Sigal said he expected the liquidations, and he said NewMark already was in negotiations to fill all the spaces.

"With Mervyn's and Linens 'n Things, for quite some time we were pretty aware of what was going on corporately with those companies. They really should have gone out of business a while ago," he said.

"For us, there's a silver lining. We'll get rid of tenants that are weak and replace them with stronger ones that will drive traffic for the tenants around them. Neither Mervyn's nor Linens 'n Things were driving much traffic."

Other local shopping centers with more than one of the failed stores include Long Beach Towne Center, Fallbrook Center in West Hills, Burbank Empire Center and Stevenson Ranch Plaza in Santa Clarita.

Long Beach may fare better than some of the others because that mall totals 1 million square feet and the space taken up by the two stores is less than 5 percent.

Also helping is the abundance of big box stores, including Sam's Club, Wal-Mart and Lowe's Home Improvement, as well as a 26-screen multiplex. Mike Garner, regional director with Vestar Property Management, which manages the Long Beach shopping center, said the Linens 'n Things space is drawing interest from off-price retailers.

"Traffic is definitely down, but this type of mall is a daily-needs type project," said Garner. "People still need to buy clothes, food, office supplies. The stores aren't doing as well as they had been, but they're doing OK."

The Mervyn's closures could hit one major local shopping center operator hard. Four of the Mervyn's liquidations are at malls owned and operated by Santa Monica-based Macerich Co.: Lakewood Center, Los Cerritos Center, Montebello Town Center and Stonewood Center in Downey.

Because of the unusual size of most of the Mervyn's stores, finding replacements for entire stores could prove a challenge.

"There's not a retail tenant out there that has that typical size," said retail strategist Stoffel.

Forever 21?

However, one retailer has expressed big interest in the Mervyn's sites: Forever 21 Inc., the Los Angeles-based cheap-chic clothing store chain that operates 430 stores throughout the United States.

Before Mervyn's filed for Chapter 7 on Oct. 17, it had filed for Chapter 11 in late July and announced the closing of 26 stores. Forever 21 offered an undisclosed amount for Mervyn's remaining 150 stores. But there has been no official action in U.S. Bankruptcy Court and there has been speculation the deal is dead.

Forever 21 did not respond to calls for comment.

The most likely solution for many Mervyn's will be to split them up into separate retail spaces, such as for clothing or sporting goods tenants, as NewMark's Sigal said will likely happen in Thousand Oaks.

This is hardly the first time the region's shopping centers have been slammed with store closings. Los Angeles is littered with the corpses of failed retailers and those that were swallowed up by out-of-state retail chains, including Robinsons-May, Bullocks, Silverwoods and a host of others.

Even though new chains arose to fill the niches, not all shopping centers realized the benefits, particularly those not located in affluent or highly visible spots.

For some of these marginal centers, Stoffel said it could take years to fill these new vacancies if at all. "Some of these landowners may decide it's better to get out of the retail business entirely, or go towards some mixed-use."

Wave of Closures

L.A.-area shopping centers facing multiple vacancies (with square footage).


JANSS MARKETPLACE

Thousand Oaks (455,000 sq. ft.)

- Mervyn's (85,000)

- Linens 'n Things (41,000)

- Shoe Pavilion (8,500)


FALLBROOK CENTER MALL

West Hills (880,000 sq. ft.)

- Mervyn's (80,000)

- Linens 'n Things (35,000)


LONG BEACH TOWNE CENTER

Long Beach (1 million sq. ft)

- Linens 'n Things (35,000)

- Shoe Pavilion (10,000)


BURBANK EMPIRE CENTER

Burbank (900,000 sq. ft)

- Linens 'n Things (35,200)

- Shoe Pavilion (Not disclosed)


STEVENSON RANCH PLAZA

Santa Clarita (150,000 sq. ft)

- Linens 'n Things (35,000)

- Shoe Pavilion (Not disclosed)

Business Journal research

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