DOTHAN, AL-Movie Gallery Inc. has hired a firm to sublease floor space in about half of its 4,800 Movie Gallery and Hollywood Video stores as it attempts to boost revenue. The locally based public video rental company says it expects retail partners to occupy 2,500 sf at more than 2,200 locations.

The firm retained for the subleasing initiative is New York-based Excess Space Retail Services, Inc. Movie Gallery EVP Keith Cousins says the company expects not only incremental rental revenue but also increased sales from the additional traffic that its retail partners will generate. Excess Space chief executive Michael Wiener says his firm already is receiving interest from national and regional retailers, giving him confidence of a "high degree of success."

Dennis McAlpine, managing partner of McAlpine Associates, a Scarsdale, NY-based entertainment research firm, tells GlobeSt.com that while the average store size is 4,200 sf, the Hollywood Video stores average closer to 6,500 sf and some are as large as 7,500 sf. "They're going, 'We've got more space than we need for our business, let someone else use it,'" says McAlpine.Movie Gallery is the second largest North American video rental company with annual revenue in excess of $2.6 billion and stores in all 50 U.S. states, Canada and Mexico. In its 2004 annual report from last March, Movie Gallery says it locations are controlled with short lease terms "that allow us to respond quickly to changing demographics, competition and other market conditions and to close non-performing stores promptly." As of the end of 2004, the company said more than 400 of its leases are considered for renewal each year and its average remaining lease term was three years.

Through a representative, a Movie Gallery executive declined comment on such things as how it expects its short lease terms to affect its subleasing effort; whether it will be able to obtain a higher rent on sublease space than it is currently paying; and whether there will be any store closures as part of the process. A source with Excess Space says the company has a policy of not commenting on behalf of its clients.

Since its IPO in August 1994, Movie Gallery has grown from 97 stores to 4,800 stores. A big chunk of that growth came in April 2005, when it closed on its acquisition of Hollywood Video, which at the time operated 2,031 specialty home video retail stores and 20 freestanding video game stores throughout the US.

In operation since 1992, Excess Space has provided real estate disposition and lease restructuring services to about 150 national and regional retailers. The company has offices in Huntington Beach, CA and Lake Success, NY.