Retail sales drop expected to last through June

— -- Retail sales will drop even further through June but will improve by year's end as consumers release pent-up shopping demand, the chief economist for the International Council of Shopping Centers said Thursday.

Sales will be down 1.8% in 2009 overall, including a 5% drop in the January-June period from a year earlier and a 2.7% increase for the second half of the year, according to ICSC. The trade group says it expects sales to increase 3.3% in 2010. Last year, sales fell 0.9%.

"In the midst of all this doom and gloom, it's hard to imagine it getting better," says ICSC chief economist Michael Niemira. "But keep in mind, what happens in strong downturns is there's a hefty pent-up demand. It's wrong to extrapolate these conditions for the next year or two."

Still, the late 2009 rebound won't be soon enough for the estimated 150,000 stores that are expected to close in 2009, says Niemira. About 150,000 of the nation's 1.1 million stores closed in 2008, up from 135,000 in 2007.

Store openings in 2009 won't ease the pain; most big plans have been scuttled or postponed indefinitely if construction wasn't already in progress.

"Retail leasing is at a stop," says Jim Bieri of the retail real estate consulting firm The Bieri Co. "The few merchants that are still opening stores have cut back on their openings, and most companies have stopped new store development completely."

Niemira says a small percentage of the 100,000 shopping centers are likely to shutter, as well. While that's bad news for the communities losing their shopping hubs, the bigger impact may come from retail mixed-use developments that were being banked upon to help communities make comebacks. Those that aren't already being built are often stalled or dropped because of the credit crisis.

"There's no appetite from a capital perspective for new deals," says Stuart Eisenberg, director of real estate services for the accounting and consulting firm BDO Seidman. "Overall the problem right now is there's no place to get the money, so things have pretty much stopped."