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America's retail footprint is shrinking. And not just because the industry will lose about 40,000 more stores than it gains this year, when the recession causes retail sales to drop at least 1%.

The trend toward smaller stores is picking up steam. Initiated by the popularity of mini-marts, aimed at consumer convenience, the move away from larger spaces is now fueled by cost-cutting. Sharp sales decreases are making it difficult for many retailers to cover the rent. The broad expansion of retail space over the last decade resulted in many rent agreements tied to developers' construction costs rather than store productivity, and now retailers can't keep up even though some landlords are willing to negotiate.