With the commercial real estate market in a continued pattern of free fall, coupled with the still-lagging economy overall, creditors are likely to see a continued increase in overall bankruptcy filings for the foreseeable future. For every strip mall or office park that watches as long-time, valued tenants vacate their spaces, there are landlords who cannot service the debt on their property due to an overall decrease in rental income, and there are small business owners now joining the ranks of the newly-unemployed, along with their employees.
The unfortunate trickle down sees both employees and small business owners seeking bankruptcy protection, along with a growing number of commercial property owners who are unable to find replacement tenants to make up the shortfall in rental income.
Additionally, those tenants remaining behind may see a lag in business as a result of the loss of “anchor stores” which attracted casual shoppers to the area. This point was driven home by the recent Chapter 11 filing by Movie Gallery, Inc., the operator of the Hollywood Video chain. Preliminary indications are that a “significant number” of Hollywood Video stores will be shuttered in the coming months, leaving hundreds of strip malls across the country without a valued tenant.
The Bankruptcy Department at Weltman, Weinberg & Reis will continue to monitor trends in bankruptcy filings and will update you as data becomes available.
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