As the holiday shopping season draws near, the weaker retail chains will be facing their hour of reckoning, with their sales growth during the November/December period determining their ability to survive. And while most retailers have already closed their worst performing stores and made their operations as lean as possible over the past few years, the uncertain economic climate might lead to a substantial number of store closures in the first quarter of 2012.

By conservative estimates, next year will likely bring more than 5,000 store closings, says Michael S. Wiener, president and CEO of Excess Space Retail Services Inc., a national consulting and advisory firm specializing in disposition and lease restructuring. And that’s not counting closings related to bankruptcies and liquidations.

The reasons are easy to point to: consumer confidence is still low and economic uncertainty has left many business leaders with a conservative mindset. Meanwhile, while U.S. retailers have been able to restructure a significant number of their leases in 2008, 2009 and 2010, by this point in the market cycle, if the stores are not bringing in a sufficient volume of sales, even lower rents can’t save them, Wiener notes.

Already in the fourth quarter, discount retailers Syms and Filene’s Basement have filed for bankruptcy, with plans to liquidate after the end of the holiday season.

“Lease restructuring efforts have staved off many store closings, but as time has worn on, many retailers are now having to face the reality of a grouping of stores within their portfolio that just don’t work,” Wiener says.

Dim prospects

So far in 2011, the retail real estate industry experienced fewer store closing announcements than during the same period in 2010. ICSC numbers show there have been 2,196 store closing announcements in the first three quarters of the year. The figure is less than half the 4,889 store closings announced in the first three quarters of last year. For the whole year 2010, U.S. retailers closed 5,572 stores.

The figure for the whole year 2012 might be lower by up to 30 percent, just because U.S. retail chains have already adapted so many cost-cutting measures to stay afloat, says Matthew Bordwin, co-president of GA Keen Realty Advisors, a division of Great American Group, a real estate consulting firm that specializes in workouts and restructurings. Nevertheless, conditions in the sector remain perilous and will be so until consumers see significant job growth and feel more confidence in their future.

“I am pretty pessimistic about holiday sales, so I am expecting a new round of closings come January, February and March,” Bordwin notes. “For the past three years it’s been the same thing—until unemployment numbers change consistently for the better and consumer confidence numbers change consistently for the better, shoppers are just not spending more than they need to.”

Who’s at risk?

Up to this point, most of the store closings have come from the book, apparel and footwear retailers.

But the consumer electronics sector appears to be in a particularly perilous situation as well, unless some popular new tech gadget creates a reason for shoppers to visit those stores during the holiday season, Bordwin says. And apparel stores continue to have a hard time. Year-to-date, U.S. apparel retailers tracked by ICSC posted same-store sales growth of just 2.8 percent, compared to the industry-wide growth of 5.1 percent.

“In 2012, I think you are going to see more small specialty stores closing, you will continue to see restaurant chains struggling and see old c-store formats starting to vacate as well,” says Andy Graiser, co-president of DJM Realty, a real estate consulting and advisory firm that specializes in restructuring and disposition. “From the big-box spaces, we are still expecting to see small to mid-priced department stores continue to struggle. My reasoning is that it comes down to the economy. Middle America shows no signs of recovery and seems to be more concerned with spending [its] disposable income on mortgage and car payments and putting food on the table.”

Plus, even in a relatively stable environment, one large bankruptcy or liquidation can skew the overall store closings figure much higher.

For example, in the third quarter of this year, the liquidation of Borders and restructuring efforts by the owners of Payless ShoeSource and Stride Rite have together accounted for over 700 store closing announcements. Without those two events, there would likely be fewer than 200 store closing announcements by national retailers during that time period.

Yet given the debt crisis in Europe, political turmoil in the U.S. and the specter of another global financial crash, the retail real estate industry should be prepared for more unexpected twists in the coming months, according to Wiener.

He mentions that the store closings number in 2012 “could go much higher if some of [these] uncertainties took a turn for the worse.”