As major retailers file for bankruptcy and vacate stores, a domino effect is taking hold across the country. Shopping centers are reeling from the loss of income, and some are so hard-hit that the owners are handing the keys back to lenders and walking away.

Restructuring consultants are guiding both property owners and retailers as they try to avoid the painful slide into bankruptcy. Landlords and tenants who wind up filing for Chapter 11 protection from creditors are hiring advisers to locate essential debtor-in-possession financing to cover their operating costs during and after the bankruptcy process. But credit is so hard to get that the lack of financing has derailed many retailers' restructuring efforts and forced them into liquidation.

“There's very little restructuring debt available today. The banks simply aren't lending,” says Keith Shapiro, former chairman of the American Bankruptcy Institute and now an attorney with the Chicago office of Greenberg Traurig. While retail chains have dissolved in court, property owners' financial crises have primarily been dealt with out of court with their lenders, Shapiro says.

In short, the damaged economy and global credit crisis have created a perfect environment for bankruptcy. The International Council of Shopping Centers (ICSC) estimates that 148,000 stores closed in 2008,- and at least 73,000 will close in the first half of this year. “It appears that a substantial amount of space will become available over the coming 12 to 18 months,” says financial analyst Kyle McLaughlin of New York-based research firm Reis.

In 2008, 27 major retailers filed for Chapter 11, a nearly 400% increase from 2007, according to BankruptcyData.com. In the first half of January alone, major retail filings for Chapter 11 protection in federal bankruptcy court reached a seven-year high.

Goody's Family Clothing and 104-year-old Fresno, Calif.-based department store Gottschalks have filed for bankruptcy. And Swiss-based UBS Securities identifies 39 at-risk retailers on its January tenant watch list, including retail icons Macy's, Neiman Marcus, Nordstrom and Borders bookstores.

With a national unemployment rate of 7.6% and still rising, fearful consumers are spending less and choosing discount houses over specialty and department stores. Same-store retail sales fell 1.6% in January, according to ICSC. Given the spate of bankruptcies and store closures, the national vacancy rate is expected to reach 17% by midyear, up from 11.8% at the same time last year, says Suzanne Mulvee, real estate strategist for Boston-based Property & Portfolio Research.

Small shopping centers hit hard

When a retailer catches pneumonia, the landlord shivers, since the health of a shopping center is tied to its tenants. “Smaller owner-operators have had significant problems and have handed the keys over to the lender,” says Stuart Eisenberg, partner and managing director of the real estate group at BDO Seidman. The Chicago-based financial adviser's clients own hundreds of shopping centers, and include such retailers as Barnes & Noble and Jones Apparel Group.

Some larger shopping center owners also have decided that a site doesn't warrant further investment and have returned the property to the lender, Eisenberg says. “Even some [real estate investment trusts] have elected to let go of a property as opposed to continuing to lose money on it.”

The Shops at Atlas Park in Queens, N.Y., a sparkling $200 million, 400,000 sq. ft. center, opened just two years ago. But in February, it was taken over by its lenders, the French banks Société Générale and Calyon, after the owner, Atco Properties & Management, defaulted on its loan.

In Cupertino, Calif., Cupertino Square LLC and Vallco International Shopping Center LLC filed for bankruptcy as its lender prepared to foreclose after the owners failed to repay a $195 million construction loan. A hearing on a reorganization plan is scheduled late this month.