Colliers International issued its Spring 2009 Retail Report in advance of next week's ICSC RECon show. Even though there are signs that the economy may be stabilizing, retail faces some real challenges, the report concludes.
According to the release Colliers issued with the report:
Shopping center owners, investors and tenants alike have fallen victim to a severe reduction in retail spending, leaving store space vacant and same-store sales well below levels seen in recent years. Retailers have shown little interest in opening new outlets, and are instead waiting on the sidelines for economic conditions to improve and for a visible uptick on the jobs front.
In the meantime, a perfect storm has developed for retailers. The shrinking consumer dollar has essentially left the retail real estate marketplace overbuilt, and as a result, the retail sector is in the midst of one of the greatest contractions experienced in decades.
o Most chains will continue the trend of shuttering underperforming locations that began in 2008; indeed, retailers closed more stores than they opened last year, and will do likewise in 2009
o This fallout could spread to otherwise well-run retailers due to plunging sales
o Urban retail continues to outperform suburban retail, but even rents in the most fashionable urban shopping districts have been on a downward trend
o A number of markets now have retail vacancy clocking in above 12 percent
o The strongest U.S. markets (vacancy-wise) share a common characteristic: development in these markets has been curtailed in recent years due to a lack of available land
o In terms of occupancy growth, 36 of the top 42 U.S. markets recorded negative net absorption during Q1 2009
o Neighborhood and community shopping centers are currently the most stable shopping center format
o The collapse of anchor and junior anchor space users such as Mervyn's, Goody's and Circuit City sent vacancies sharply higher for regional malls and power centers
o As for construction, developers are quickly putting projects on hold
o Rents are, unsurprisingly, trending downward
o General Growth Properties is the specter keeping landlords up at night. Large debt load coupled with inability to refinance equals massive worries for landlords
o Retail REITs are facing one of the toughest environments ever, and will also look toward dispositions to raise capital
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