Praying
For Retail
The near-term prospects for the retail business aren’t
particularly rosy, with the financial markets’ meltdown
and the general economic weakness scaring consumers
into hiding. The financial and real estate markets in the US
are expected to bottom out in 2009 and flounder for much of
2010, with ongoing drops in property values, more foreclosures and delinquencies and a limping economy that will continue to crimp property cash flows and consumer spending.
Emerging Trends in Real Estate 2009, a joint report from
the Urban Land Institute and PricewaterhouseCoopers LLP,
predicts that commercial real estate will experience a rough
and lengthy correction. And retail will be part of that
bumpy ride.
“We’ve all got to pray for retail,” says Jonathan Miller, a
consultant with ULI who also blogs for GlobeSt.com and is
the report’s principal author. “It’s had a great run, but it’s in
for a tough time.”
No less bleak is the National Association of Realtors’ forecast, with chief economist Lawrence Yun predicting retail rent
www.GlobeSt.com/NewJersey
The 2009 consumer
landscape is bleak, so
look for conservatism
to rule the market
By Alyson Grala
Associate Editor
growth to turn negative in 2009, thanks in part to curbed
consumer spending tied to unemployment and spiking food
and energy costs. And any chance of new retail development
is also expected to be hampered by a lack of financing.
“Although capital remains available for residential loans,
the credit crunch is pronounced in commercial lending,” he
says. “Combined with a slowing economy, the lack of credit
is curtailing activity in the commercial real estate sectors. As
a result, there’s been a slowdown in the net absorption of
space, which is leading to higher vacancies and more modest
rent growth.”
According to NAR, vacancy rates in the retail sector are
expected to be 10.4% in Q2 of ’09, up from 9.75% in the
second quarter of this year.
Adding further fuel to the recessive picture, the International Council of Shopping Centers’ Chain Store Sales Trends
revealed that October comparable-store sales declined 0.9%
from October 2007 to October ’08, the worst in 35 years. With
the exception of Wal-Mart, whose sales rose 2%, the outlook
