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Report: Dollar Stores, Fast Feeders to Add Space in 2010

NEW YORK -- Discounters and fast-food chains are set to expand this year as U.S. consumers embrace a "new frugality," Boston-based commercial property broker Colliers International said its 2010 "Retail Trends & Opportunities" report.

Low-cost restaurants and retailers, including Papa John's International Inc. and TJX Cos., are planning to add stores following the loss of more than 4 million U.S. jobs last year and a reduction in consumer spending, Bloomberg News reported, citing the Colliers report.

"The 'New Frugality' is here for at least five years," Garrick Brown, national retail research director for Colliers, said in the report released this week. "Necessity and off-price retailers will continue to fare best."

Last year's rise in unemployment, which followed a loss of 3.1 million jobs in 2008, hurt retailers and their landlords as consumers curtailed spending. The National Retail Federation (NRF) predicts that retail sales, excluding automobiles, gas stations and restaurants, will increase 2.5 percent this year following a 2.5-percent drop last year. Job losses likely will bottom out this quarter, Colliers said in its report.

The bankruptcies of Circuit City Stores Inc., Linens 'n Things Inc. and Gottschalks Inc. in 2008 and 2009 contributed to rising retail vacancies across the U.S., sending rents down 25 percent to 40 percent, depending on the market, Colliers said. Lower rents have been "a huge factor" in the expansion of Dollar Tree Inc.; TJX's T.J. Maxx and Marshalls stores; and Ross Stores Inc.'s Ross Dress for Less chain, the report stated.

Dollar General, based in Goodlettsville, Tenn., plans to open 600 stores this year and remodel or relocate as many as 500, following the addition of about 500 stores in 2009, the company said in December. The retailer likely will expand on the West Coast and in New England, where it has little presence, Colliers said.

Among fast-food restaurants, Chipotle, the Denver-based burrito chain spun off from McDonald's Corp. in 2006, added 121 locations last year, and plans to open 120 to 130 more this year, according to a Feb. 11 conference call. Louisville, Ky.-based Papa John's also expects to have a net increase of 40 to 80 locations worldwide this year having recently dropped a $25,000 franchise fee, the company said in a regulatory filing.

"As part of the 'new frugality,' fast-food and fast casual operators with lower price points have fared better and will be in expansion mode -- albeit mostly franchise-driven," Brown wrote in the report. "The strongest concepts will face little problems finding strong private capital groups to achieve their growth plans."

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