Retail Leasing Sector: Bad, Bad, Bad

Excellent article in Globe St today about how the national retail sector is doing at the moment. It doesn't look good. From my own personal experience, stores are doing everything they can to get customers through the door. I tend to buy a lot of clothes for work and the sales are just too numerous to name at the moment. Recently I had a coupon mailed to me by Express Stores offering $30 off of any purchase of $75 or more. That's pretty significant and I was a bit skeptical, but lo and behold, I bought some slacks and a few other (heavily marked down) things from there for $76 and ended up with a $46 bill. On Monday I got yet another $30 off coupon mailed to me from Express. Although it got me in the store, I wonder how much this is all costing them. I wandered into my local Dillards last Friday and was amazed by the sheer number of markdowns everywhere. This is good if you're a bargain hunter, but not so good if you're a commercial real estate agent or landlord relying on retail leasing for your livelihood.

To underscore my point, one shopping center near my house (which was recently purchased by Developer's Diversified), has gone from 98% occupied to 65% occupied in a span of three months. This wasn't because one large user left, either. Six or seven inline tenants just vaporized over a period of 12 weeks (Coldwell Banker, Patio America, Manatee Mattress, etc). One former tenant, Party City, angrily stuck a sign in the window of their vacant unit reading "Lease Expiring...Cannot Afford the New Lease". I took a photo of this which is posted above.

We're living in interesting times, that's for sure.

From Globe St...click link below for the rest of the story at GlobeSt.com:

Slowing Economy Nibbles Away at Retail Fundamentals

There are two economic storms brewing in the US now – one on Wall Street and one on Main Street. The retail real estate sector sits squarely in the middle of both -- a fact that was illustrated earlier this month when Starbucks announced it was closing 500 stores by mid-2009. But Starbucks is hardly the only retailer to confront slowing sales with a cutback in real estate. Build-A-Bear Workshop will dramatically cut back on store openings next year, it announced this month, it announced this month, as will Regis Corp., the parent of Supercuts and other salon chains, which plans to close about 160 stores, most of them in malls to name just a few examples.

While all the commercial real estate sectors are suffering from the capital market freeze, retail developers must also contend with occupancy and rent projections that are looking more and more grim. “Right now retail is in the crosshairs of two trends: a slowdown in leasing due to slow retail sales, and a capital market that is reluctant to lend,” says Ray Cirz, CEO and managing director of Integra Realty Resources. He points to an iconic lifestyle center on the eastern seaboard that has been reluctant to issue a date for a grand opening. “Construction is complete and they have signed a number of major anchors but they are having trouble filling the inline space,” he tells GlobeSt.com. “Leasing has been that slow.”

Click here for the entire article.