The Retail Slump and Malls [Housing Tracker]

Commercial Real Estate and REITs: Retail and Malls 

Too Many Malls, Too Few Tenants. “With the economy slumping and shoppers spending less, retailers that had flocked to… lifestyle centers, [or] open-air shopping venues … have begun canceling expansion plans and even shutting stores. Others… have sought bankruptcy protection. This couldn't happen at a worse time for lifestyle-center developers, which were putting up more of the shopping centers than ever. Market-research firm Portfolio & Property Research Inc.: Last year they built 37 centers totaling some 12 million-sf, or roughly 40% of the total lifestyle-center square footage added this decade. Double the 2007 total is now under construction, and three times as much is in the planning stages.” (Wall St. Journal, July 17^th) 

REITs Will Hold Back from Centro-Type Deals.“Private retail investors are likely circling to snatch up value deals, such as [Australian] Centro Property Group’s 10% discount on its $714-million sale yesterday for 29 properties, though REITs are likely holding to a more conservative mode in this recession, says retail experts. The credit crunch and store-sale drop-off has affected every aspect of the industry, and even the retail REITs are playing it safe, says Michael Dee, EVP of business development for the Dallas-based Staubach Retail. Centro is just another company that has gotten caught in the recent troubles, he says.”  (Globe St., July 17^th)

Real-Estate Financier's Death Hints At Trouble for Lenders. “[Late] real-estate financier Scott Coles’ Mortgages Ltd., [was] one of Arizona's biggest private lenders during the real-estate boom. It specialized in short-term, high-interest-rate loans to commercial developers -- builders of malls, office parks, condominiums and other projects -- who either had bad credit or a need for quick cash with no red tape. But he overreached, and the debacle that has devastated the U.S. housing market the past year is now squeezing Mortgages Ltd… Mortgages Ltd. and other lenders are reporting a significant jump in loan defaults. That's placing enormous new pressure on the lenders, which have bet billions of dollars on new construction of commercial properties.” (Wall St. Journal, July 16^th)

Increase in Store Closings Weighing Down the Boat... “Retail real estate trade group ICSC expects 144,000 stores to physically close in 2008… If ICSC’s estimate is realized… store closures would [be] up 7% over 2007 -- the highest increase in 14 years. ICSC says it expects "a similarly large increase in new retail store openings" this year. While this is welcome news, such openings likely won't create a balancing effect when you combine the trend of shopping center vacancy consistently rising with nearly 76 million-sf of shopping center space estimated to deliver in 2008 and another 79.5 million in 2009 (CoStar Property Professional's Analytics).” (CoStar Group, July 16^th) 

Trademark Buys Padre Staples Mall in Texas, Plans $50 Renovation. “Trademark Property purchased Padre Staples Mall in Corpus Christi, Tex, the company said today. The firm plans to immediately begin an estimated $50 million renovation of the 1,017,704-square-foot property, which will now be known as La Palmera. The renovation is scheduled to be completed in fall 2009. The joint venture partner on the La Palmera project is Institutional Mall Investors L.L.C.” (Commercial Property News, July 16^th)

 

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Comments

[User 179505]

More and more pressure for stores to sell on the internet.

[billddrummer]

I for one, don't think the retail industry is dead. I work for BBY part-time, and many customers say they like to touch, feel and experience products before purchasing them--things you can't do on the Internet. But many (if not most) customers use the 'net for research, which is why it's even more important to have well-trained sales staff who can answer questions intelligently about products, especially technology-related ones. Nothing is more frustrating to a shopper than getting no help when you need it--whether it's just a pointer to the right area of a store, or in-depth knowledge of particular products.

I believe that the retailers who weather this period well will be the ones who keep well-trained people, continue to invest in them, and view customer satisfaction as a priority.

Wal-mart is an example of a company that has succeeded by promoting good value through low prices and a streamlined delivery system. Other retailers, specialty and discount, can differentiate themselves only if they provide a superior delivery system. Wal-mart clones have failed--ShopKo, Kmart, Linens & Things--which bodes ill for others trying to do the same thing.