DSW closing at OV Marketplace - Tucson Local Media: Business

DSW closing at OV Marketplace

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Posted: Wednesday, November 18, 2009 12:00 am

Bargain shoppers were bustling around a shoe megastore at Oro Valley Marketplace last week, but for DSW the flurry of commerce was too little too late.

Ohio-based DSW, a major player in retail shoe sales, plans to close its Oro Valley at Oracle and Tangerine roads.

DSW opened the 14,000-square-foot store in the Northwest on Oct. 30, 2008. It was the retailer's second store in the Tucson area, the other on the city's East side near Broadway and Kolb Road.

Company representatives did not return phone calls requesting comment on the closure.

As recently as last month, the company reported 6 to 8 percent earnings in the third quarter, which ended Oct. 31. The company's stock price has increased in value to slightly more than $21 per share as of last week after dropping to a low of $7 in March.

The company first went public in July 2005. Its stock price reached a highpoint of nearly $43 per share in April 2007. Its price is down an average of 17 percent since going public.

DSW operates 306 stores in 39 states and has 10,000 employees. A company news release from 2008 said DSW planned to open 35 new stores that year.

The DSW closure marks the first retailer to shutter its operation at the year-old Oro Valley Marketplace shopping center.

Earlier this year, home furnishing company Linens 'N' Things announced it would not open a store at the shopping center. Another planned tenant, ColdStone Creamery also pulled out before opening.

A spokeswoman for Vestar, the company that owns the Oro Valley Marketplace, could not confirm the closure date of DSW. The spokeswoman did say two new restaurants have made plans to open at the shopping center.

DSW's closure reflects a grim reality about the retail conditions in Southern Arizona.

"It has been absolutely bleak," said Craig Finfrock of Tucson-based Commercial Retail Advisors.

While the housing market has been faltering since late 2007, Finfrock said it wasn't until late 2008 that the retail and commercial real estate sector began to suffer.

Finfrock said newer shopping centers like the Oro Valley Marketplace traditionally fare poorly during economic downturns, because the newer centers still have investors and construction expenses to pay off.

Owners of newer centers are often placed at a disadvantage because of the higher rents they charge to make ends meet.

Retail sales too, have declined since 2008. According to the University of Arizona's quarterly report, "Arizona's Economy," retail sales figures have fallen off by more than 11 percent in the past year.

The report also notes retail employment has suffered. Since 2008, employment in the retail sector is down by nearly 9 percent.

The weakened economy has pushed up vacancy rates in the Tucson area as well. According to one measure, commercial vacancies topped 4,200 properties in the second quarter of 2009. There were more than 28,000 business addresses during the same quarter.

The U.S. Department of Housing and Urban Development compiles residential and commercial vacancy figures with help from the United States Postal Service, whose letter carriers take note of addresses where mail has not been claimed for more than 90 days.

The vacancy rate, however, could bode well for those in the rental market. Faced with increased vacancies, landlords are often desperate to retain tenants.

"It's a tenants' market, clearly," Finfrock said.

With lots of available space, landlords will be more likely to offer tenant incentives like reduced or free rent.

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