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Online shopping seen as the cause of high retail vacancy rates

Robust demand in California cities like Los Angeles, San Diego and San Francisco has helped most segments of the commercial real estate market to recover virtually all of the losses caused by the 2008 financial crisis and ensuing years of recession, but many industry observers are becoming increasingly concerned about the persistently sluggish retail sector. Empty stores are a common sight in many of the country's shopping malls and arcades, and retail vacancy rates across the nation remain at a disconcertingly high 16 percent.

Retail powerhouses like Borders Books, Circuit City and Blockbuster Video have closed their doors in recent years as more and more Americans choose to do their shopping online, and the surging popularity of companies like Amazon just adds to the concerns of commercial real estate investors and developers. More than 650,000 U.S. businesses generate online sales of at least $1,000 each year, and even traditional brick-and-mortar retailers are beginning to back away from opening more stores and are focusing on improving their websites instead.

Concerns over the retail sector are rippling through the entire commercial property market. High vacancy rates in shopping centers and strip malls are thought to be a reason why the commercial mortgage backed securities market has lagged behind the Green Street U.S. Commercial Property Index.

The competition for retail tenants can be fierce when stores lie vacant for long periods, and commercial property owners may feel that the need to revise their leases in order to make them more attractive. Their attorneys may suggest changes that accomplish this goal while still limiting exposure, and they could also recommend strategies that are designed to avoid lease disputes. Attorneys may also assist property owners with permit or regulatory issues that could be delaying the signing of a new lease.

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