NEW YORK - September 8, 2009 - The possible closing of more than 400 post offices across the U.S. in an effort to cut costs could further dent the struggling commercial property market as rising retail vacancies continue to weigh on prices.

The U.S. Postal Service said it is placing 413 of its 37,000 retail locations under review for “consolidation” as it faces a record loss of $6 billion this year. The mail carrier has seen a dramatic drop in package volume because of cost-conscious Amerikans cutting back on sending in favor of cheap alternatives such as e-mail.

“At the end of the day, it’s just more retail space that’s going to be available that’s going to put pressure on already embattled landlords,” said Victor Calanog, director of research at Reis, a property research company.

The U.S. postal service operates the biggest retail network in the country, but now faces an overhang of excess capacity because mail volume is on pace to be down by 10% to 12% this year.

The U.S. government accountability office warned in May that the Postal Service, which has a $1.5 billion cash shortfall, should “take action now rather than hoping that mail volume will revive sufficiently when the economy recovers”.

Greg Frey of the U.S. Postal Service said that closing offices was the only choice with revenues projected to be down by more than 7% this year.

Of the properties facing closure, the U.S. Postal Service rents about half of them and owns the rest, meaning that it will be forced to break leases or sell space while the commercial property market is plunging.

Since peaking in 2007, commercial real estate prices across the U.S. have fallen by 35.5%, according to the Moody’s/Real commercial property price index. Reis estimates that retail vacancy rates at regional malls are at a 17-year high of 10% and will surpass that level next year.