Sep. 7--The $55 million makeover that brought a movie theater and two stories of upscale shops and restaurants to Rosedale Center two years ago has turned out to be a well-timed hedge for the Roseville regional mall.

"It would be very difficult if we were trying to do that today," said Rollin Hunsicker, general manager at Rosedale for property manager Jones Lang LaSalle. "Construction costs have risen, financing is more difficult and some stores have backed off on expanding. The improvements we made better insulate us at a time when the retail market is not quite as strong."

Store closings and reduced expansion plans by retailers are taking a toll on regional malls here and elsewhere. The International Council of Shopping Centers recently released a report that said it expects 144,000 stores to close in 2008. That's up 7 percent from 2007 -- the largest increase in 14 years, the trade group said.

The vacancy rate at Twin Cities area regional malls, which had started falling in 2004, has edged up recently to about 6.3 percent, according to NorthMarq, a Bloomington-based real estate services firm.

The figures go through June 30 and don't account for more recent closings, such as those by PreVu Inc., formerly known as Wilsons Leather.

Higher vacancies can have financial consequences that go beyond the loss of rent from a departing tenant. It may cost more for a mall to attract new tenants to a center that's perceived to be struggling, said Tricia Pitchford, vice president of retail brokerage services at NorthMarq. "Sometimes other tenants' leases may be written so that they will get a rent reduction if the anchors or a percentage of the center is vacant," she added.

Coping until the rebound

No rebound seems likely soon, according to Richard Grones, founder of Cambridge Commercial Realty, an Edina-based firm that specializes in the retail market. He said some malls probably will have more short-term tenants filling space as the holiday sales season approaches. And some might use "bumpbacks" -- small tenants used to fill just the front portions of empty storefronts, he said.

"Malls are working with tenants a lot more than they used to," Grones said. In some cases that means renegotiating leases to retain tenants, or offering concessions to attract new ones, he said.

Longer-term solutions involve looking for nontraditional tenants, Grones said, such as health clinics and financial service businesses. He said the new LA Fitness at Northtown Mall is a good example of the different types of tenants being sought by regional malls.