Boston Colliers International issued its Spring 2009 Retail Report that warns of continued problems in the retail sector.
According to the report, shopping center owners, investors and tenants are experiencing 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, according to the findings, and are instead waiting on the sidelines for economic conditions to improve and for a visible uptick on the jobs front.
In the meantime, the shrinking consumer dollar has 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, found Colliers.
Among the report’s findings:
- Most chains will continue the trend of shuttering underperforming locations that began in 2008;
- This fallout could spread to otherwise well-run retailers due to plunging sales;
- Urban retail continues to outperform suburban retail, but even rents in the most fashionable urban shopping districts have been on a downward trend;
- Anumber of markets now have retail vacancy clocking in above 12%;
- 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;
- In terms of occupancy growth, 36 of the top 42 U.S. markets recorded negative net absorption during first quarter 2009;
- Neighborhood and community shopping centers are currently the most stable shopping center format;
- 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;
- As for construction, developers are quickly putting projects on hold;
- Rents are trending downward;
- Large debt load coupled with inability to refinance is causing massive worries for landlords; and
- Retail REITs are facing one of the toughest environments ever, and will also look toward dispositions to raise capital.
“On the bright side, this economy has not been without some winners,” said Ross Moore, executive VP market and economic research for Colliers International. “Discounters such as Wal-Mart have been recording same-store sale increases, and drug stores have been one of the most active retail categories in recent years.”
“Survival will be the name of the game in 2009, and even for stronger players, the emphasis will shift from store openings and expansion to streamlining operations,” said Pat Duffy, chairman of Colliers Retail Services Group. “Contraction may be the harsh reality for most, but the strongest concepts will prevail, not only from the elimination of competition, but from the best tenant’s market in decades.”