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The wave of national retailers closing their doors started to hit Lincoln earlier this year, and it has driven the local retail vacancy rate to its highest point in two years.

According NAI FMA Realty's 1st Half 2018 Lincoln Market Report, retail vacancy hit 4.8 percent at the end of June, the highest level since June 2016, when it was 5.2 percent.

The amount of retail space vacant in the city was up by more than 75,000 square feet from the beginning of the year.

"A new wave of big-box downsizing and exit of long-established chains is occurring," the report said.

The report, which covers the first half of the year, accounted for the closing of Toys 'R' Us at the end of June, which left a vacant 30,000-square-foot space at Lincoln Crossing in north Lincoln, as well as smaller closings such as Akin's Natural Foods and Lincoln Lighting Center.

It did not, however, include the closing of Younkers at Gateway Mall last weekend.

Younkers closed as part of the overall liquidation of its parent company, Bon-Ton Stores, leaving its 100,000-square-foot space at the mall vacant.

That's the largest single retail vacancy in Lincoln since 2010, when Gordman's vacated its longtime home at 46th and Vine streets to move to a smaller store at Lincoln Crossing.

That location was eventually repurposed into a home for Stanley Healthcare Solutions, and that may be what will happen with Younkers at Gateway. Mall officials have not given any hint as to what may be in store for the space, but commercial real estate experts in Lincoln have suggested it could be home to offices, a call center, senior housing, self storage or an entertainment business.

NAI FMA President Richard Meginnis said he sees the Younkers space at the mall as a prime candidate for some sort of redevelopment.

Not only is that area of the mall "in dire need of repair," he said, but there also just aren't any big-box retailers of that size expanding.

With few exceptions, larger retailers generally have been pulling back on opening new locations. Others are actively closing hundreds of stores.

For example, Sears, which is another one of Gateway's anchor tenants, has announced more than 200 closings of Sears and Kmart stores this year, and its store count is down by more than 500 since the beginning of 2017.

Chains that are expanding, such as off-price retailers Ross Stores and Burlington (formerly Burlington Coat Factory), don't need locations that big.

"Burlington Coat Factory has looked at Lincoln off and on for 15 years," and may eventually open a store here, said Sally DeLair, a sales associate with NAI FMA.

But overall, DeLair said, "retail has changed."

She said that while demand for large spaces continues to decline, there's strong demand for smaller retail space.

"There's a lot of action in the 1,000-,3600-square-foot (retail) bays," DeLair said.

In fact, she said it can be difficult to find good spaces in that range that don't need a lot of expensive renovations.

Other retail tenants that continue to expand include dollar stores, wireless phone stores and auto parts stores, all of which have added locations in Lincoln over the past couple of years.

Despite the increase in the retail vacancy rate, Lincoln is much better off than the nation as a whole. The national vacancy rate as of June 30 was 10.2 percent, according to research firm Reis Inc., the highest rate since 2014, and the amount of occupied real estate space fell to its lowest level since 2009.

There are still bright spots in Lincoln's retail market. Urban Air opened a trampoline park earlier this summer in a former Russ's Market space at 70th and Van Dorn streets. The new Canopy Street Market, an 8,000-square-foot grocery store, opened Thursday in the West Haymarket area.

And, of course, later this month Scheels will open its new 220,000-square-foot mega store at SouthPointe Pavilions, complete with Ferris wheel and saltwater aquarium.

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Reach the writer at 402-473-2647 or molberding@journalstar.com.

On Twitter @LincolnBizBuzz.

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Business editor/reporter

Matt Olberding is a Lincoln native and University of Nebraska-Lincoln graduate who has been covering business for the Journal Star since 2005.

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