2009 Retail Sales Down 6.2%, Highest Since 1992

Considering this news, I would expect to see more store closings, more layoffs and more vacant retail space in the coming months. 2008 wasn't nearly as bad and we saw quite a few retailers go under in 2009, namely Waldenbooks, Circuit City and Boater's World.

WASHINGTON (AP) -- Retail sales fell in December as demand for autos, clothing and appliances all slipped, a disappointing finish to a year in which sales had the largest drop on record.

The weakness in consumer demand highlighted the formidable hurdles facing the economy as it struggles to recover from the deepest recession in seven decades.

The Commerce Department said Thursday that retail sales declined 0.3 percent in December compared with November, much weaker than the 0.5 percent rise that economists had been expecting. Excluding autos, sales dropped by 0.2 percent, also weaker than the 0.3 percent rise analyst had forecast.

For the year, sales fell 6.2 percent, the biggest decline on records that go back to 1992. The only other year that annual sales fell was in 2008, when they slipped by 0.5 percent.

The 0.3 percent decline in December was the first setback since September, when sales had fallen 2 percent. Sales posted strong gains of 1.2 percent in October and 1.8 percent in November, raising hopes that the consumer is starting to mount a comeback.

Consumer spending is considered critical to any sustained economic revival since consumer spending accounts for 70 percent of total economic activity.

The December drop in sales was a surprise given that the nation's big retailers had reported better-than-expected results last week, reflecting a surge of last-minute holiday shopping. But even with the rebound reported by the nation's biggest chains, these retailers suffered their worst annual performance in more than four decades in 2008, according to data from the International Council of Shopping Centers.

The 6.2 percent fall in the government's retail sales figure is only the second decline on records that go back to 1992. In all other years, even during previous recessions, retail sales, which are not adjusted for inflation, have managed to increase.

For December, sales of autos dropped by 0.8 percent following a 1.2 percent rise in November.

Sales at specialty clothing stores fell by 0.6 percent while sales at general merchandise stores, a category that includes big retailers such as Wal-Mart, were down by 0.8 percent while sales at department stores were flat.

Sales at electronics and appliance stores dropped by 2.6 percent and sales at hardware stores dropped by 0.4 percent.

The weakness over the year reflected the battering that consumers have taken from the worst recession since the Great Depression, a downturn that has cost 7.2 million jobs and left households trying to rebuild savings depleted by losses on Wall Street and a crash in housing prices.

Economists are worried about consumer spending in the months ahead given their forecasts that unemployment, currently at 10 percent, will keep rising until perhaps midyear.

The overall economy, as measured by the gross domestic product, grew at an annual rate of 2.2 percent in the July-September quarter and many economists believe that growth strengthened even further in the final three months of last year. However, the worry is that GDP will slow significantly in the early part of 2010 unless consumers continue to spend.

For December, a diverse group of retailers including Costco Wholesale Corp., Target Corp., Macy's Inc. and TJX all reported increases. Luxury stores like Saks Inc. and Nordstrom also saw strong December sales gains and even Sears Holdings posted a small gain on rising sales at its Kmart chain.

Also helping to support retail spending in December was a hint of better days ahead for the battered auto industry. Automakers in the United States ended their worst year in almost three decades in December with slight improvements, led by gains in sales of small cars.

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Leased! Leased! Leased! Leased!

Two units leased since December 1 in this strip mall next door to Wal-Mart on Cortez Rd. I have one 1,150sf unit left and that one looks like it might be spoken for. Welcome to Allison's Dance Centre and Purple Coconut Hair Salon. Allison's took 2,250sf for 3 years and Purple Coconut took 1,200sf for 2 years. Out of my approx. 40 listings, this property has been the most active.

Leased Another One!

This baby is 90% leased!

Many thanks (and congratulations) to Mr. Horras Sheffield and his wife for renting our nice little 1,000SF retail unit for his upcoming package liquor store. I still have one 1k SF unit left in this strip center at 4034 N Washington Blvd in Sarasota and then it will be 100% leased. Mission not quite accomplished...yet! Landlord is motivated, so bring me something.

Leased Another One - 6,400 SF to National Tenant

Boulder, CO-based Camp Bow Wow (CBW) finally moved into their new digs: a 6,400 sf air-conditioned ILW-zoned property fronting 17th Street. ILW was the only favorable zoning that could accept a dog-daycare facility without a special exception.

CBW sunk nearly $150,000 worth of capital improvements into the landlord's building. We wish them and the landlord all the best! I was glad to help them.

Leased Another One

Just wanted to welcome PEN Produce to their new home at 2065 12th St in Sarasota. PEN is run by a great guy named Pete Greci and he'll be running a small farmer's market on the weekends to supplement his produce distribution business. PEN leased 4,800 square feet for 3 years. Welcome, guys and thanks for the business!

Area Losing Two Dillards Stores.

I'm wondering when the time will come where most large malls will either be bulldozed or turned into college campuses. No surprise DeSoto is losing tenants; you almost need a bodyguard or a gun to go shopping there. Everyone I know avoids that place.

2 Dillard's stores are said to be closing in the region

Dillard's confirmed it will close its store at Westfield Sarasota Square. Also, sales associates at the DeSoto Square Dillard's said they have been told that store will close before the end of the year.

By Toni Whitt

Published: Thursday, July 23, 2009 at 1:00 a.m.
Last Modified: Wednesday, July 22, 2009 at 10:02 p.m.

In another sign of stress on the Southwest Florida economy, giant retailer Dillard's is closing two of its four stores in the region.

The anchors at Westfield Sarasota Square and DeSoto Square Mall in Bradenton are two of the five store closings that the Little Rock, Ark.-based retailer plans nationally in 2009.

The company confirmed on Wednesday that the Westfield Sarasota Square is closing, but a corporate spokeswoman would not confirm the shuttering of the Bradenton site.

Sales associates, however, said they were told that the DeSoto Square Dillard's would close before the end of the year. Many of their co-workers have already been transferred to other stores.

Consumers have cut their spending at a nearly unprecedented level in the last year as the nation's financial crisis, recession and rising unemployment has reduced their wealth and willingness to part with cash.

Dillard's, with 306 department stores and nine clearance centers in 29 states, reported earlier this month that its same-store sales fell 15 percent for the five weeks ended July 5 -- a worse drop than analysts had expected.

The DeSoto store shows all the signs of closing. Display cases stand empty amongst the perfume and handbag displays, and nearly one-third of the department store's second floor has been roped off and filled with empty display racks and other fixtures.

The store is going to be hosting a shipment of clearance merchandise that will go on sale the week of Aug. 1.

If both stores close by the end of the year, there will be only one Dillard's department store -- at Westfield's Southgate mall in Sarasota -- between Port Charlotte and St. Petersburg.

Dillard's spokeswoman Julie Bull said the company has begun working with sales associates to move them to other stores, but that it might be impossible for some employees to stay with the company.

The pain in retail has yet to show major signs of abating after one of the worst holiday and spring seasons in decades. It is not expected to perk up in the important back-to-school season.

Even the normally optimistic National Retail Federation is projecting that consumers will spend nearly 8 percent less on back-to-school supplies than in 2008.

In Southwest Florida, plans for several malls have been put on hold, meaning that billions in new investment and thousands of new jobs are still possibly years away.

Those delayed projects include the University Town Center, a luxury mall slated for University Parkway and Interstate 75, a regional mall along I-75 in North Port and a one-million-square-foot retail center planned for Punta Gorda.

Westfield Corporation Inc., the Australian owner of Westfield Town Center, has plans to acquire the building Dillard's occupies at Sarasota Square and to develop the space, said spokeswoman Catherine C. Dickey.

"The company has a strong track record of recovering real estate and reorienting the space with other shops and restaurants," Dickey said.

That will be a challenge in this economy, and perhaps especially in Sarasota County where retailers have been closing at an unprecedented pace. Data from the county tax collector show that one in four retailers have gone out of business in the past year.

The closing of the Dillard's at DeSoto Square will be a blow to that aging mall, owned by Indianapolis-based Simon Property Group.

Starbucks, Old Navy, Lady Foot Locker and Waldenbooks all closed at the mall this year.

Across from Dillard's anchor at DeSoto Square are three empty storefronts, each bearing the sign "More Choices, More Opportunities."

DeSoto Square was built in 1973 and is showing its age. Simon, the largest shopping mall owner and operator in the U.S., bought the property in 1996 and immediately built a food court, but has done little since. The mall has three anchors besides Dillard's: J.C. Penney, Sears and Macy's.

Simon spokeswoman Les Morris declined to comment.

The company, a real estate investment trust, reported in May that its first-quarter funds from operations improved, but Simon cut its quarterly dividend 33 percent.

Benderson Buys Back Properties at Discount

Mostly of interest because these two companies are fairly big players in the local market here. DDR has a project near my home that has managed to go empty very slowly. I mentioned the woes of this particular mall last August in this very blog. Click here for the original article.

Benderson Development Co. is buying back eight local shopping plazas, plus three more in other parts of New York, from Developers Diversified Realty Corp.
Charles Lewis/Buffalo News

Updated: 06/07/09 07:31 AM
Benderson buys back local plazas at a discount
Firm pays 30% lessfor properties it soldfive years ago
By Jonathan D. Epstein NEWS BUSINESS REPORTER

Benderson Development Co., Buffalo’s biggest homegrown retail landlord, is pulling off a major financial coup, buying back 11 shopping mall properties in upstate New York for significantly less than it sold them for just five years ago.

The commercial developer has signed contracts to buy eight malls or shopping plazas in Western New York, and three in other parts of the state, from Developers Diversified Realty Corp., a publicly traded real estate investment trust based outside Cleveland, according to sources familiar with the deal.

That will return more than 3 million square feet to Benderson’s local portfolio. Sources said the purchase price was between $160 and $175 million.

The plazas are among the same properties that Benderson had first sold to DDR in March 2004. That deal, worth $2.3 billion, involved a total of 110 properties, 52 of which were in the Buffalo Niagara region.

Since then, however, the real estate market has turned soft, slumping retail sales have driven up vacancy levels at shopping plazas as stores have closed, and the credit crunch that hit last fall has further squeezed property owners.

“It’s good that the ownership is going in the direction that it is,” said Michael C. Clark, director of retail tenant services at CB Richard Ellis in Buffalo. “There’s going to be a lot of markets in other parts of the country where they have portfolios for sale by different REITs and they don’t have someone like Benderson to step up.

“We’re pretty fortunate in terms of the market, in regard to that. How much better can you get than the folks that developed them and are intimately familiar with them and live and breathe here? They certainly know what they’re doing,” Clark said.

The average price five years ago was $21 million, versus an average of about $15 million for the current deal — a discount of almost 30 percent.

“They’re buying them back for something like 70 cents on the dollar from what they sold it,” said Greg Klauk, president of Buffalo appraisal firm KLW Group.

“Nobody ever expects the prices to drop that quickly,” said William J. Kimball, managing director and principal in the Syracuse office of Integra Realty Resources, the nation’s No. 1 commercial real estate property valuation and consulting firm.

Benderson must still complete its “due diligence” on the properties, but that’s likely to be pretty short, since Benderson is familiar with the properties.

“It’s a very positive thing that they want to continue with these assets,” Kimball said. “They’re going to be the ones to make them work.”

Benderson and DDR officials declined to comment, citing confidentiality. However, DDR spokeswoman Betsy Keck noted that the company has already announced that “we are in active negotiations to sell shopping centers.” DDR has already sold more than $67 million in assets through the first quarter, she added, and has $175 million in assets under contract.

“It is our policy not to comment on potential asset sales before they close,” Keck said in an emailed statement.

The eight Western New York properties being acquired are:

• Boulevard Consumer Square in Amherst, with 700,810 square feet.

• Eastgate Plaza in Clarence, with 520,876 square feet.

• Marshall’s Plaza in Buffalo, with 82,196 square feet.

• Sheridan/Delaware Plaza in Tonawanda, with 188,200 square feet.

• Sheridan-Harlem Plaza in Amherst, with 58,413 square feet.

• Tops Market in Hamburg, with 84,000 square feet.

• Transit Commons in Amherst, with 114,177 square feet.

• Transit Wehrle Retail Center in Lancaster, with 112,949 square feet.

“Benderson is very savvy,” Kimball said. “They’ve done similar type deals where they’ve purchased properties that have been underperforming and done wonderful things for them.”

The sale of the shopping plazas has been the subject of speculation during the past two weeks, including at an International Council of Shopping Centers conference in Las Vegas last month. Local brokers reported hearing discounts of as much as 40 percent or more on the price Benderson was paying, versus what DDR paid in 2004.

That reflects the significantly changed circumstances confronting real estate developers and owners, especially those with shopping centers, like both DDR and Benderson.

Retailers have been struggling to maintain sales and post profits, as consumers pulled back sharply on spending in the last year. Many stores have filed for bankruptcy protection, and big names like Circuit City have even gone out of business.

As a result, landlords like DDR have struggled to maintain their rental income and the values of their own properties have fallen along with the broader commercial real estate market. “There’s a lot of REITs that aren’t in the position they were 12 or even 24 months ago,” Clark said.

DDR owns and manages 720 properties with 153 million square feet of space in 45 states, Puerto Rico, Brazil, Russia and Canada, including what it got from Benderson.

The company has already been whittling down the original Benderson portfolio, selling an 85 percent interest in 14 properties in April 2004 to a joint-venture trust with Australia’s Macquarie Bank, a major real estate investor worldwide.

It also sold a 90 percent interest in 13 shopping centers — including four Tops Market plazas in Western New York — in October 2004 to Prudential Real Estate Investors. And it sold another four Western New York shopping centers anchored by Tops to New York investors in January 2007.

Finally, as the market started to turn down last year, it sought to sell two bundles of properties with 1.5 million square feet of space, including Office Depot Plaza in Tonawanda, Sheridan- Harlem Plaza in Amherst and Regal Cinemas in Niagara Falls.

But the company was hampered last fall and early this year by the freezing of the capital markets, which constrained its cash flow and ability to make payments on its debt. It lost $179.6 million in the fourth quarter before rebounding for an $87.4 million profit in the first quarter of 2009. And its cash fell by $20 million last year, raising questions about its ability to pay its debts.

In February, it agreed to sell 30 million common shares and issue warrants to buy another 10 million shares to Germany’s Otto family, which owns or controls major European and North American shopping center firms, plus the Crate & Barrel chain. That makes the family DDR’s largest shareholder.

The company also got a commitment from the family for a $60 million, five-year fixed-rate secured mortgage, and got $125 million in new debt financing.

“All of these transactions are important steps in lowering our leverage and improving our liquidity, and we continue to work diligently on additional initiatives,” DDR CEO Scott Wolstein said.

Still, its stock has been hammered in the past two years, falling 98 percent from a height of $67.07 in February 2007 to a low of $1.34 on March 3, 2009. The shares closed at $5.60 on Friday.

Hence the need for property sales, even at big discounts. “They need some liquidity and in order to sell something in today’s market, this is the price,” Kimball said. “There really is a dearth of activity. This isn’t a time when you’d want to sell.”

For its part, Benderson, founded in 1950 by Nathan Benderson, is one of the nation’s top retail developers with more than 250 properties and 25 million square feet of commercial space in 35 states, and another 4.5 million square feet under development. It also owns and develops office buildings, industrial parks, residential communities, and self-storage facilities, and owns the Delta Sonic car wash company and its Buffalo Lodging Associates hotel division.

Originally based in Buffalo, the privately owned company moved its headquarters to University Park, Fla., in early 2004, but is still a major player in Western New York, with a regional office and 52 properties.

But it also has properties throughout New England, New Jersey, Pennsylvania and Ohio, as well as one in St. Louis. And it has 21 properties in 13 cities in Florida, especially in Bradenton and University Park — areas that have seen significant drops in property values.

Media's Effect on Spending

Not necessarily a post about commercial real estate per se, but I find it interesting how heavily the media plays into general economic fear. No doubt we are facing some strong economic headwinds, but one really needs to question how much worse the constant flow of instant information makes things. Interesting read. See link below for the rest of the article. From The Washington Post.

Frugality fuels recession's vicious cycle
Even those whose jobs are safe are spending less, which holds down growth
By Michael S. Rosenwald
The Washington Post
updated 4:57 a.m. ET, Thurs., April 16, 2009

WASHINGTON - Denise Kimberlin and her husband, Craig, of Woodbridge are government contractors who make nice livings. They recently got raises. They don't fear losing their jobs.

Yet, something is driving them to change their spending habits. They have cut back by at least $250 a week on clothes, dinners out and other discretionary spending.

So, too, has Bob Scanlon, a Brookeville executive with the Transportation Security Administration. He feels his job is secure. But recently he decided to lop $50 a month off his family's cable bill. When they dine at their favorite restaurant, they go on half-price Tuesdays.

The frugality of the Kimberlins and Scanlons and millions of other Americans who still have their good jobs feed back on the economy, holding down growth and encouraging other worried workers to trim their spending — causing the whole vicious cycle to run another lap.

"It really can become and does become a self-fulfilling prophecy," Denise Kimberlin said.

Psychological traps
Economists say many still-flush consumers are handcuffed by psychological traps that cause them to tighten their purse strings even though economic hardship is not their reality. Underscoring the crucial role that consumer psychology will play in turning around the economy, President Obama and Federal Reserve Chairman Ben S. Bernanke have both been on the hustings this week sounding notes of optimism.

"Traditional economics assumes that we are all rational, that we approach these things very rationally, take in all the information, and then weight it and make a decision," said Thomas Gilovich, a Cornell psychologist and co-director of the university's Center for Behavioral Economics and Decision Research. "To a behavioral economist that seems clearly untrue."

Denise Kimberlin said she began cutting back after the holidays, when at family gatherings and work parties she heard stories of people losing their jobs and people saving money around the edges. The stories made her wonder, "What if?"

These perceptions are reinforced by the blare of the news media. When network news anchors Brian Williams and Charlie Gibson lead their broadcasts with bleak news about the economy and consumers clamming up, people who don't necessarily need to cut back decide to anyway.

In August, the three major TV network newscasts spent a total of 85 minutes covering economic news, according to the Tyndall Report, which monitors newscast content. In September, when the banking crisis began and layoffs spiked, the coverage totaled 403 minutes. In the same month, Gallup's polling shows upper-income consumers dropped their total daily spending to about $160, from a high of $185 in May.

By last month, after what must feel like an eternity of stories about creative ways strapped people are saving money, they had cut back further — to $101 day.

Click here for the rest of the story.

Circuit City ripples go beyond vacancies, layoffs

Very good dissertation on the ripple effect Circuit City closings will have throughout the nation. The article is actually incorrect...the company, DJM, who is handling the subletting of the existing Circuit City sites claims over 27-million square feet of "project" encompassing over 600 locations. Click here for info on that.

Link below for the entire article. From MSNBC.

Circuit City ripples go beyond vacancies, layoffs
Pain to be felt by mall owners, suppliers, local businesses, even newspapers
The Associated Press
updated 4:57 p.m. ET, Wed., Feb. 4, 2009

Circuit City will finally flicker out when its last 567 stores close this year, but the bankruptcy of the nation's second-largest electronics retailer will ripple across the U.S. economy for years.

In its wake will be 18.71 million square feet of vacant space in a faltering real estate market. More than 40,000 workers will be jobless, including 7,000 laid off last year.

Shopping centers will lose rental income. Suppliers will lose display space. Newspapers already struggling with falling ad revenues will have one less glossy insert in their Sunday editions.

Circuit City is bigger than any other retailer that has gone under in the current recession. The job outlook for its workers is worse. The prospects for suppliers finding other customers is grim, and a larger pool of creditors are likely to go unpaid.

"The situation today is so different than" during other downturns, said Jerry Mozian, a restructuring expert at Tatum LLC. "It wasn't the whole economy. Here, we've got a worldwide recession."

Other big retail bankruptcies, like Macy's in 1992 and Kmart's in 2002, ended in reorganizations or buyouts rather than liquidation.

Circuit City initially hoped to reorganize when it filed for Chapter 11 protection in November. It was sagging under the weight of $2.32 billion in debt and dismal sales as consumers cut back. But the 60-year-old company couldn't work out a sale or secure new financing, and on Jan. 16 announced it would close for good.

The chain owes nearly $625 million to its 30 largest unsecured creditors — mostly vendors who supply the DVDs, flat-screen TVs and headphones on Circuit City shelves. They must wait to be paid until secured creditors such as bank lenders are satisfied.

That's hitting electronics makers when they can least afford it. Hewlett-Packard, which is shedding 8 percent of its work force after a big acquisition, is owed nearly $120 million. Samsung, which posted its first ever quarterly loss Friday, is owed roughly $115 million. And Sony, which saw its net profit fall 95 percent in the October to December quarter, is owed $60 million.

Smaller businesses also got burned. Freelance photographer Scott Brown had worked for Circuit City's corporate office in Richmond, Va., for two years, shooting photos of people and products for the company's advertisements. The account grew to represent a quarter of his business.

The 41-year-old delivered his last project just four days before the company filed for Chapter 11. At the time, Circuit City owed him nearly $30,000. Brown listed himself as a creditor with the courts and hired an attorney. But the lawyer advised him he would probably never get paid.

"It was huge," Brown said of the loss. "It added to the stress of the daily business like you wouldn't believe."

The vacant stores leave a huge hole for shopping center owners to plug. The 18.71 million square feet of space is like the Raymond James Stadium in Tampa, Fla., where the Super Bowl was played — multiplied by 11.

Finding new tenants is increasingly difficult, as chains like Linens 'N Things, Mervyns and Steve & Barry's also go out of business. Other companies such as Starbucks and Ann Taylor are retrenching from an era of swift expansion.

Making matters more difficult is the size of most Circuit City stores, which range from nearly 17,000 square feet in Steubenville, Ohio, to more than 66,000 square feet in El Paso, Texas. Very few retail tenants require such large spaces, said Green Street Advisors analyst Nick Vedder.

"The anchors are really one of the most important pieces of the center," Vedder said. "They bring in the traffic, they are the lifeblood that (other) tenants rely on to bring customers to the stores."

Read rest of the story...

Circuit City to Liquidate All Stores

I don't think they ever recovered from the whole DIVX failure. In any event, lousy return policies, questionable "salespeople" and junk warranties pretty much did them in. Look for lots of vacant big boxes on a corner near you.

Bankrupt Circuit City Stores Inc., the nation's second-biggest consumer electronics retailer, said Friday it failed to find a buyer and will liquidate its 567 U.S. stores. The closures could send another 30,000 people into the ranks of the unemployed.

"This is the only possible path for our company," James A. Marcum, acting chief executive, said in a statement. "We are extremely disappointed by this outcome."

The company had been seeking a buyer or a deal to refinance its debt, but the hobbled credit market and consumer worries proved insurmountable.

The liquidation of Circuit City is the latest fallout from the worst holiday shopping season in four decases. People have slashed their spending since the financial meltdown in September as they worry about their job security and declining retirement funds.

Other recent casualties include KB Toys, which filed for bankruptcy in December and is liquidating stores. Department store chains Goody's Family Clothing and Gottschalks Inc. both filed for bankruptcy this week—Goody's plans to liquidate, while Gottschalks hopes to reorganize.

Industry experts expect more bad news in the coming months as spending likely will deteriorate further.

Circuit City said in court papers it has appointed Great American Group LLC, Hudson Capital Partners LLC, SB Capital Group LLC and Tiger Capital Group LLC as liquidators.

"Regrettably for the more than 30,000 employees of Circuit City and our loyal customers, we were unable to reach an agreement with our creditors and lenders," Marcum said.

Shareholders are likely to receive nothing, as is typical in bankruptcy cases. It was unclear what would happen to the company's 765 retail stores and dealer outlets in Canada.

"Very, very sad," said Alan L. Wurtzel, the son of company founder Samuel S. Wurtzel, and the chief executive from 1972 to 1986, board chairman from 1986 to 1994 and vice chairman until 2001. "I feel particularly badly for the people are employed or until recently were employed."

Wurtzel has previously said Circuit City didn't take the threat of rival Best Buy Co. seriously enough and, at some points, were too focused on making a profit in the short term instead of building long-term value.

Circuit City filed for Chapter 11 bankruptcy protection in November as vendors started to restrict the flow of merchandise ahead of the busy holiday shopping season.

It had been exploring strategic alternatives since May, when it opened its books to Blockbuster Inc. The Dallas-based movie-rental chain made a takeover bid of more than $1 billion with plans to create a 9,300-store chain to sell electronic gadgets and rent movies and games. Blockbuster withdrew the bid in July because of market conditions.

Circuit City, which said it had $3.4 billion in assets and $2.32 billion in liabilities as of Aug. 31, said in its initial filings that it planned to emerge from court protection in the first half of this year.

Under court protection, Circuit City has broken 150 leases at locations where it no longer operates stores. The company already closed 155 stores in the U.S. in November and December.

U.S. Bankruptcy Judge Kevin Huennekens had given the company permission to liquidate if a buyout was not achieved. The company still needs final approval of a liquidation from the court.

The liquidation is the latest big blow to the nation's malls, which have suffered from a rise in vacancies as a slew of chains from Mervyns LLC to Linens 'N Things have liquidated. But analysts say that the demise of Circuit City, whose stores range in size from 20,000 to 25,000 square feet, will hurt the fortunes of mall operators even more.

"It will bring to market a glut of big box spaces across the country," said John Bemis, head of Jones Lang LaSalle Inc.'s retail leasing team. "It will have one of the largest impacts on big box real estate across the country."

LINK

Comm Markets Won't Bottom Out Until 2010

ULA predicts what most of us already know: 2009 is going to be a pretty lousy year in commercial real estate. What will emerge, however, will be a much more disciplined banking and lending environment.

Read on:

Commercial Real Estate Market to Hit Bottom Next Year, Urban Land Institute
by Peter L. Mosca

No matter the market, capitalizing on industry knowledge has always been a major ingredient to overall business success. For builders looking to better understand the real estate market, they should take note of a new report by the Urban Land Institute. According to the "Emerging Trends in Real Estate® 2009" report, released by the Urban Land Institute (ULI) and PricewaterhouseCoopers LLP, real estate industry experts expect financial and real estate markets in the United States to bottom in 2009 and then 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,

"Commercial real estate faces its worst year since the wrenching 1991-1992 industry depression," conclude industry experts interviewed for the report, which projects losses of 15 percent to 20 percent in real estate values from the mid-2007 peak. "Only when property financing gets restructured will pricing recorrect so we can find the floor; and this transition could wipe out companies and people," said one respondent interviewed for the report.

In general, interviewees believe that financial institutions will continue to be pressured into moving bad loans off balance sheets, using auctions to speed up the process. Investors will be discouraged until the "bloodletting' is over, states the report. When that occurs, cash and low-leverage buyers will be "king;" surviving banks will impose strict lending guidelines; commercial mortgage-backed securities will revive, but in a more regulated form; and opportunity funds will need new investment models.

"The industry is facing multiple disconnects," said ULI Senior Resident Fellow for Real Estate Finance Stephen Blank. "Many property owners are drowning in debt, lenders are not lending, and for many (industry professionals), property income flows are declining. There is an unprecedented avoidance of risk. Only when financing gets restructured will pricing reconcile, giving the industry a point from which to start digging out of this hole."

"The cyclical real estate markets always comes back, and they will this time too, but not anytime soon," said Tim Conlon, partner and U.S. real estate sector leader for PricewaterhouseCoopers. "Commercial real estate was the last to leave the party, will feel the pain in 2009, and may be the last to recover. In the meantime, smart investors are going to hunker down and manage through these tough times. We expect to see patient, disciplined, long-term investors rewarded, and return to a back to basics approach to property management, underwriting and deal structure."

Distress in the housing market is benefiting the apartment market, which the report lists as the number-one "buy." Moderate-income apartments in core urban markets near mass transit offer the best buy, a trend that carried over from the previous year.

The report acknowledges that commercial markets will recover more quickly than most housing markets, and homebuilders may have to sell land tracts for "cents on the dollar" or face foreclosure on their holdings, adding to the already high rate of mortgage defaults and foreclosures.

One silver lining: Interviewees agreed that eventually, savvy investors will be able to cash in on the inevitable recovery, which some see occurring as early as 2010. "Money will be made on riding markets back to recovery and releasing properties, not on…financing structures," finds the report.

Before a rebound, Emerging Trends says the following needs to happen:

* Private real estate markets need to correct - lenders must force distressed owners to become motivated sellers.

* Debt capital needs to flow - lenders will need to learn to deal in a more stringent regulatory landscape. The commercial mortgage-backed securities (CMBS) market must "reformulate."  Regulators need to restore confidence in the securities market. The government will insert itself into overseeing mortgage securitization markets. Systemic overhaul promises more measured debt flow.

* The economy needs to improve. Falling demand for space won't affect real estate markets severely until 2009.

The Report also offered these tips for what to do in 2009:

* Recap distressed borrowers - invest in maturity defaults, construction loans/bridge loans, or take mezzanine positions and equity stakes in properties.

* Focus on global pathway markets - 24-hour coastal cities.

* Staff up asset managers, leasing pros and workout specialists. Separate good assets from bad.

* Retrench on development and reorient to mixed-use and infill. Higher-density residential with retail will gain favor in next round of building.  Go green - cutting energy expenses is likely to be a priority.

* Buy or hold multi-family; hold office; hold hotels; buy residential building lots, but be prepared to hold.

* Purchase distressed condos in urban areas near transit.

Lastly, the Report listed a number of markets to watch in 2009. Here's a look at the Report's Top 5 Markets:

* Seattle boasts its "corporate giants," but the market braces for rising downtown office vacancies; now at 10 percent. Tepid job growth will flatten rental rates. Housing demand drops and prices will slip, but stay above national averages. Interviewees rate the market a strong "buy" for apartments, and the "number-one buy" among industrials is the Puget Sound ports.

* San Francisco offers a Pacific gateway and a high quality of life with a well-diversified economy. The city ranks first for development and homebuilding, and is a leading "buy" city for apartments and office. Even though housing prices are expected to decline, foreclosures should remain in check, the report notes.

* Washington is the "ultimate hold market when the economy struggles." Downtown office vacancies should remain below 10 percent, and apartments lease "no matter what." The above-average employment outlook offers promise for the retail sector, the report says. Still, office vacancies continue to soar in northern Virginia, and further declines in condominium and home prices can be expected.

* New York takes a beating with the Wall Street "implosion" creating job losses and office vacancies. Hotels should continue to draw tourists with the weak dollar. Retail frenzy ends, but the wealthy keep Madison Avenue boutiques alive. With the condo/coop market at a "crest," developers "should worry about flagging buyer demand," the report notes.

* Los Angeles downtown benefits from condo/apartment projects. "It's almost impossible to lose money on apartment investments if you have a five- or 10-year investment horizon," notes one respondent. Hotels benefit from global pathway location. One downside -- homebuilders in San Bernardino and Riverside continue to grapple with the housing collapse.

Rounding out the top ten markets to watch:

* Houston. Stays relatively strong as long as energy stays hot. It makes the top ten for the first time since 1995. Office vacancies drop to 10 percent, "a good buy opportunity," but apartments soften. Cheap land results in cheap housing, and prices have not gone up dramatically.

* Boston. Job outlook is more favorable than most cities, with office space "tight" in the Financial District and the Back Bay area. New "harborside hotels threaten older product."

* Denver. The state capital has a major federal government presence, which should buffer job losses. Steady population growth and broadening diversification of the industry keeps the housing market stable. Mass transit should pay future dividends.

* Dallas. Compares favorably to other "hot-growth" markets. Although office vacancies downtown are 20 percent or higher, apartments do well and developers keep building single-family homes.

* Chicago. Apartments do well, but condos weaken as speculators leave the market. Office vacancies are in the low teens, and O'Hare International Airport keeps industrial space in the "global pathway."

While most of the findings in the ULI Report were unfavorable, there were 'silver linings' mentioned. For builders looking to seek competitive advantages, possessing the best knowledge available about the industry should help the process lead to greater success.

LINK

Wave of Retail Bankruptcies and Closings On The way

From Bloomberg. 73,000 stores may close after the new year and before June of 2009 according to ICSC. Expect a lot more vacancy. Read on.

Holiday Sales Drop to Force Bankruptcies, Closings

By Heather Burke

Dec. 29 (Bloomberg) -- U.S. retailers face a wave of store closings, bankruptcies and takeovers starting next month as holiday sales are shaping up to be the worst in 40 years.

Retailers may close 73,000 stores in the first half of 2009, according to the International Council of Shopping Centers. Talbots Inc. and Sears Holdings Corp. are among chains shuttering underperforming locations.

More than a dozen retailers, including Circuit City Stores Inc., Linens ‘n Things Inc., Sharper Image Corp. and Steve & Barry’s LLC, have sought bankruptcy protection this year as the credit squeeze and recession drained sales. Investors will start seeing a wide variety of chains seeking bankruptcy protection in February when they file financial reports, said Burt Flickinger.

“You’ll see department stores, specialty stores, discount stores, grocery stores, drugstores, major chains either multi- regionally or nationally go out,” Flickinger, managing director of Strategic Resource Group, a retail-industry consulting firm in New York, said today in a Bloomberg Radio interview. “There are a number that are real causes for concern.”

Sales at stores open at least a year probably dropped as much as 2 percent in November and December, the ICSC said last week, more than the previously projected 1 percent decline. That would be the largest drop since at least 1969, when the New York-based trade group started tracking data. Gap Inc. and Macy’s Inc. are among retailers that will report December results on Jan. 8.

Women’s Clothing, Electronics

Consumers spent at least 20 percent less on women’s clothing, electronics and jewelry during November and December, according to data from SpendingPulse.

Retail Metrics Inc.’s December comparable-store sales index will drop an estimated 1.2 percent, or 5 percent excluding Wal- Mart Stores Inc. Retailers’ fourth-quarter earnings may fall 19 percent on average, the seventh consecutive quarterly decline, according to Ken Perkins, president of Retail Metrics, a Swampscott, Massachusetts-based consulting firm.

Probably 50,000 stores could close without any effect on consumer choice, Gregory Segall, a managing partner at buyout firm Versa Capital Management Inc., said this month during a panel discussion held at Bloomberg LP’s New York offices. Only retailers with healthy balance sheets will survive the recession, according to Matthew Katz, a managing director at consulting firm AlixPartners LLP.

Store Closings

The ICSC predicts, using U.S. Bureau of Labor Statistics data, that 148,000 stores will shut down in 2008. That would be the largest number since 151,000 closings in 2001, during the last recession, according to ICSC Chief Economist Michael Niemira. The total number of retail establishments will decline by about 3 percent this year, also taking into account locations that were opened, he said. The U.S. had 1.11 million retail locations in 2002.

Another 73,000 locations may shut their doors in the first part of 2009, Niemira said.

The U.S. economy shrank in the third quarter at a 0.5 percent annual pace, the worst since 2001, according to the Commerce Department. Economists surveyed by Bloomberg in the first week of December forecast the world’s largest economy will contract through the first half of 2009.

The Standard & Poor’s 500 Retailing Index has shed 34 percent this year, with only two of its 27 companies rising.

The index doesn’t include Wal-Mart, the world’s largest retailer, which fell 24 cents to $55.11 at 4:02 p.m. in New York Stock Exchange composite trading. Wal-Mart shares have gained 18 percent this year.

Discount Advantage

“If you’re going to be in retail right now, the discount space is where you want to be,” Patrick McKeever, a senior equity analyst at MKM Partners LLC, said today in a Bloomberg Television interview.

Discounts of 70 percent or more by Macy’s, AnnTaylor Stores Inc. and other retailers failed to prevent a spending drop of as much as 4 percent during the final two months of the year, according to data from SpendingPulse. Retailers’ pricing models are being challenged by consumers, according to Richard Hastings, consumer strategist at Global Hunter Securities LLC of Newport Beach, California.

“The whole pricing system is becoming an old-fashioned bazaar,” Hastings said today in a telephone interview. “They’re going into the stores and they’re looking at the stuff and they’re saying ‘You know what? I know that that price is way too high,’ and they have figured out that the signage doesn’t mean that much.”

Retail bankruptcies may help the industry in the long run, according to Flickinger.

“We’ll be going from a Dickens-esque worst of times this December to the best of times in future Decembers because we’ll rationalize out all the redundant retailers and retail space in shopping centers,” Flickinger said.

To contact the reporter on this story: Heather Burke in New York at hburke2@bloomberg.net.
Last Updated: December 29, 2008 16:17 EST

LINK

Anyone Care To Guess What THIS Will Do To Big Box Retail?

As much as I love technology, and I really love technology, I was frozen in my tracks after seeing this little gem of an application. Information is power, that's for sure.

Consider this: you're shopping for a television in a big box store. Let's say you find a 42" LCD that you love. The price is $1,499 in the store + sales tax. You whip out your Android-powered phone (i.e., Android = Google powered, it's available now at T-Mobile), scan the barcode of the product right there in the store and, within seconds, a list of online retailers shows up with the same product for $400 or $500 less with free shipping. Next to this is a button that says "Order Now?" What do you do? If it's me, I would order it from the online retailer without thinking twice and walk out of the store I was in. This is terrific and it is here NOW.



What struck me was the specter of what this kind of thing could do to brick and mortar retail. If physical stores cannot compete with this (and they cannot in my opinion), what will become of them? There are always people who will need things immediately (computer cables, DVDs, blank CDs, etc.), but when it comes to high margin stuff like televisions, digital cameras, and computers, life is about to become even tougher for retailers. Saving 30% and sometimes 50% by shopping online is pretty significant. Yes, buying products online has pretty much always been less expensive, but now a person can just point their phone at the product and have the information in seconds.

With the Apple iPhone and Amazon.com, all you need to do is take a photo of the product. They've gotten that smart. Pay attention to the video below at 1:17. Just take a photo of something like a TV and it will figure it out for you.



Will the world end up with fewer retailers and more fulfillment centers eventually? Time will tell and I would reason to guess we are headed in that direction. Not everyone uses this technology...yet. All it takes is a modest amount of consumers to stop buying high margin items from big box stores. Most of these stores are in trouble as it stands already and this could be the tipping point. I speak from a bit of experience as I was in the music business for over a decade and watched profits erode as MP3s and file sharing cut out the need for distributors. That's another subject, but that experience is still pretty fresh.

Upsale Sarasota Mall Delayed

This is not all the surprising to most of us in the business. Most retailers are reeling at the moment and the situation is expected to worsen before it gets better. From the Sarasota Herald Tribune.

Upscale mall will be late

By Toni Whitt
STAFF WRITER

Published: Sunday, December 7, 2008 at 1:00 a.m.
Last Modified: Sunday, December 7, 2008 at 12:11 a.m.

SARASOTA - Construction of the new University Town Center Mall featuring Neiman Marcus, Nordstrom and Macy's has been put on hold until the economy turns around.

The move is not surprising given that all of the anchor retailers are suffering from the downturn. Neiman Marcus saw same-store sales drop 14.5 percent in the last quarter. The retailer saw another 11.9 percent decline for the month of November.

Neiman Marcus, which is set to webcast its quarterly report on Wednesday, may have urged the developers to stall the mall project until the economy gets better.

"We're hoping it's a short delay," said Mark Chait, director of Florida leasing for Benderson Development Co., LLC, one of the three partners in the project. He said construction will begin as soon as "economic and retail conditions improve."

It will take two years to build the mall once construction begins, he said.

That means the mall probably will not open before 2012, because most analysts do not believe the economy will turn around before the end of next year.

Nathan Forbes, managing partner of The Forbes Co., would not comment on the retailers on Saturday, but said he plans to issue a formal statement on the construction delay and mall leases later this week.

The other two announced anchors for the mall have also been suffering under the country's economic crisis, with housing prices down, the jobless rate soaring and the credit market contracting. Nordstrom, Inc. saw a 12.1 percent decrease in same store sales in November. Year-to-date same-store sales have decreased 8.6 percent compared with the same period last year.

Macy's, Inc., the third anchor, saw a 13.3 percent decrease in November same-store sales and year-to-date same-store sales were down 4.8 percent. It has also experienced a precipitous drop in its stock price in the past year. It had been selling at around $30 a share a year ago and has since dropped to $8.61 as of last week.

The climate for malls is not good as retailers close stores, face bankruptcy and even shut down.

In a July report, the International Council of Shopping Centers predicted nearly 144,000 stores would close this year.

Mall developments are now facing foreclosure as occupancy rates decline and the delinquency rate on commercial-backed mortgage securities markets rise.

General Growth Properties, Inc., the country's second largest regional mall real estate investment trust, may have to sell the company under the weight of its debt.

"We're probably in the first inning of the commercial mortgage problem," said Scott Tross, a real estate lawyer with Herrick Feinstein in New Jersey.

The timing is terrible for the University Town Center project, which had finally cleared the last of several hurdles last month, when the state gave the developers permission to pull permits and begin building.

In an October conference call with investors, the chief executive of Taubman Centers Inc., whose company holds a 25 percent interest in the project, said that if the partners did not find favorable financing for the project, the development group planned to "self-fund" construction of the 900,000-square-foot luxury mall, which he promised would be complete by November 2010.

But in the ensuing weeks, the economy has declined even further and sales the day after Thanksgiving -- known as Black Friday -- did not bring in the sales retailers had been hoping for.

The Associated Press contributed to this report.

LINK

Economic Malaise Spreading to Leasing Market

Uh oh, looks like malaise is spreading to the lease markets as well. Personally I've had a good leasing year with little in the way of slowdown, but there may be other reasons for that. From my experience, however, I'm seeing landlords push for shorter term leases for a myriad of reasons (mostly an uncertain future), and this is borne out in the following CoStar article.

Facing Slower Lease-ups, Commercial Real Estate Brokers Envision Free Rent and Other Perks From Builders to Lure Office and Industrial Tenants

Call it the "deer in the headlights" effect. Caught in the glare of bad economic news, mixed-signals about the direction of the economy and an imminent change in administrations, many business tenants are opting to stay in a holding pattern and renew leases in their current locations rather than incur the expense and risk of moving. While that’s helping keep rents and occupancies fairly stable in most markets, brokers and analysts warn that developers may take a hit to their bottom lines in the next two years as absorption continues to flatten or decline in many U.S. markets.

At most risk are developers delivering new projects. With tenants now opting to renew their leases rather than expand or move, developers may need to cut rents, beef up concession packages and generally accept lower yields to fill buildings that started construction a year or two ago during better times, several commercial brokers told CoStar Advisor.

"Tenants don’t know what’s going on [in the economy]; they’re saying, ‘we don’t want to bite off a 10-year lease deal, let’s wait until things turn around,'" said John Dettleff, senior vice president with Grubb & Ellis in Vienna, VA. "They’re signing short-term leases because they don’t know if it’s the bottom of the cycle or still going down. And that’s too bad for developers, because [their pro formas] only make sense if they’re doing 7- to 10-year deals."

Developers with new buildings in many markets have already repriced rental rates and offered healthy tenant improvement allowances, free rent, construction management and other inducements to compel reluctant tenants to move, Dettleff said. But many are finding it difficult to overcome the inertia induced by the uncertain business climate.

"It’s very costly for industrial tenants to move equipment. And for a technology company or a mid-size government contractor, a 10-year lease may cramp their ability to sell the company, which eliminates a big exit strategy."

Developers are experiencing longer lease-up times than they expected when they launched projects two years ago, agreed Tom Capocefalo, managing director for tenant representation firm Studley’s South Florida office market. With three buildings totaling about 1.8 million square feet slated for delivery in Miami's CBD in mid-2010, owners and landlords are trying to generate some leasing momentum by providing very attractive leasing terms to initial tenants.

"I would suspect that the overall concessions they’re offering to induce tenants are probably greater than they envisioned in their pro formas," Capocefalo said. "As their leases expire, tenants will at least entertain the idea of a move. But at the end of the day over the next 18 to 24 months, they’ll remain a bit more conservative in their growth expectations; they'll stay put and attempt to secure more favorable renewals by measuring and leveraging against other office developments."

Continue Reading...

Mall Glut to Clog Market for Years

Looks like the glut of mall space will be cause for landlord headaches for a while. This will probably play into the whole TIC scenario in the near future as quite a few TICs are heavily invested into these kinds of properties. From the Wall Street Journal.

Mall Glut to Clog Market for Years
Scarce Shoppers,
Lack of Tenants
Ding Developers
By KRIS HUDSON and ANN ZIMMERMAN

Shopping-mall owners have struggled this year with a darkening economy, slowing consumer spending and store closings by retailers. But they face another problem that may persist long after the economy bounces back: a decade of overbuilding.

Developers have built one billion square feet of retail space in the 54 largest U.S. markets since the start of 2000, 25% more than what they built during the same period of the 1990s, according to Property & Portfolio Research Inc. of Boston. U.S. retail space now amounts to 38 square feet for every person in those 54 markets, up from 29 square feet in 1983, the firm says.

Consider a six-mile stretch of highway north of Dallas, where three developers are racing to finish four huge shopping centers with a combined three million square feet of space. Not only will they compete with each other, but there are three existing malls within a 10-mile radius.

"There just aren't enough tenants to go around for three projects," concedes Gar Herring, president of shopping center developer MGHerring Group of Dallas, which is building the largest of the centers.

Similar scenes are playing out across the country. DeBartolo Development indefinitely postponed construction of 700,000 square feet of retail space in Mesa, Ariz., due to weak demand. Green Street Advisors, a real-estate research firm, says 13 strip shopping centers under development have been canceled this year and 90 others have been delayed by the seven shopping-center developers it monitors.
[Mall Glut]

Of course, retail landlords struggle and store vacancies rise in every economic downturn. But this time, experts say, the overbuilding means that high occupancy rates at malls and strip centers may not return for years.

For retailers, the glut can have an upside: cheaper rents, shorter lease terms and fatter allowances from landlords for outfitting stores. This year, the rents in new lease signings are 10.4% lower on average than the asking price, down from the 9.3% discount of two years ago, says market researcher Reis Inc. of New York.

Shopping-center owners with a hefty focus on development, including Regency Centers Corp. of Jacksonville, Fla., and Weingarten Realty Investors of Houston, are compensating for the construction slowdown by trying to raise rents and sell older centers. Others, such as Kimco Realty Corp. of New Hyde Park, N.Y., have shifted much of their development abroad. Brian Smith, Regency's chief investment officer, said the real-estate investment trust has canceled some development projects, continued more cautiously with others and turned partly to upgrading existing centers. Regency's second-quarter profit was off 25%.

David Simon, chairman and chief executive of Simon Property Group Inc., the largest U.S. mall owner with 323 malls, sees "a decade of little new development" and a shakeout. "There were a lot of projects that shouldn't have been built" in recent years, he said.

Some big retailers are curtailing expansion and closing stores. For the first time since the 1990-91 recession, occupied retail space in major U.S. markets is expected to decline this year, falling by 1.2 million square feet, projects Property & Portfolio Research. Last year, occupied space grew nearly 61 million square feet, the firm says. Retailers that helped drive the building boom -- Wal-Mart Stores Inc., Home Depot Inc. and Starbucks Corp. among them -- have nearly saturated the U.S. Earlier this year, Home Depot said it would close 15 unprofitable stores and cancel 50 proposed ones, throttling back its store-growth ambitions to a meager 1.5% a year.

Continue Reading...

Economy Has Some Businesses Facing Eviction Notice

I don't think there's a statistic for the amount of commercial evictions occurring locally, but I would bet the Sarasota/Manatee market is similar to that of Miami/Dade's. It's a tough time to start a business, and just as tough to keep the lights on when your customers are cutting back on spending. Unfortunately, I think we're going to see more of the same. It's certainly as trying of a time for landlords as it is for tenants. A lot of people I talk to are very tentative about expansion and many landlords are equally worried that even good credit tenants may leave. The domino effect this has is pronounced. The good part is there are landlords out there who will attempt to work with their tenants in this market (see story below).

From Daily Business Review, by Polyana da Costa

When the owners of Tiger Allie, a Boca Raton children’s clothing store, signed a retail lease in 1997, they likely never imagined the financial and legal woes they’d face.

More than 10 years later, they are at least five months behind on their rent, a sign advertising a liquidation sale is on the door and a lawsuit seeking the store’s eviction is pending.

When Tamarac Fortune Partnership, which owns a three-story office building on University Drive in Tamarac, leased an entire floor to a group of businesses in the medical field in late 2006, the landlord had no inkling the tenants would default on the five-year lease. In July, however, the partnership sued to evict the businesses, which it says defaulted on lease payments beginning in April.

And at Boca Raton’s tony Mizner Park, at least two stores, an art gallery and an antique shop, have fallen behind in payments, according to eviction lawsuits filed against those stores.

As the economy flirts with recession, these and hundreds of other small South Florida businesses — including medical offices, art galleries and clothing stores — are struggling to keep pace with their rents. Increasingly, they’re failing. That means a sharp uptick in evictions, a boost in work for real estate lawyers and greater strains on the legal system.

The volume of all evictions filed in Miami-Dade, Broward and Palm Beach counties is up an average of 10 percent compared to last year, according to the clerk’s offices in each jurisdiction.

For example, June was a record month for lawsuits seeking evictions in Palm Beach County — 1,076 were filed compared with 877 in the same month last year. (The figures include residential evictions since the clerk’s office does not track separate actions against commercial tenants.)

Most store owners facing eviction lawsuits don’t want to comment. Representatives of Tiger Allie, the Boca Raton clothing store facing eviction, did not return a phone call.

The suits seeking evictions represent only a small number of commercial tenants who’ve fallen behind on their rents. Many landlords are choosing to work out deals with struggling tenants, said John Scott, director of client solutions at Cushman & Wakefield.

Scott said the company, which manages about 10 million square feet of office, warehouse and retail space, has not seen a mass of evictions at its properties. It has helped its landlords work with tenants who are financially strapped. The options have included lowering tenants’ rents for a period of time and rolling over the shortfall to the end of the lease, he said.

“Landlords aren’t just looking to eliminate their tenants,” he said. “The market is not as strong as it was a couple years ago. It’s hard to replace a tenant in this market. Our brokers have been working harder than ever.”

Read the rest of the story (Registration Required)
Copyright 2008, Daily Business Review

Moody's: Commercial Real Estate Prices Dip in June

NEW YORK - Commercial real estate prices continued to decline in June, according to Moody's/REAL Commercial Property Price Indices, Moody's Investors Service said Wednesday (8/20).

The index fell 3.3 percent from May, and was down 9.6 percent from the year-ago level.

June was the fourth consecutive month that the index declined, Moody's (nyse: MCO - news - people ) said. The CPPI now stands 11.8 percent below its peak in October 2007.

The index is based on repeat sales of the same properties across the U.S. at different points in time.

All four property types measured by the index went negative during the second quarter, Moody's said. The national industrial market saw the largest price drop, down 9.3 percent during the quarter. National apartment market prices fell 7.1 percent, while office prices slipped 5.9 percent and retail declined 4.6 percent.

Through the first half of the year, transaction volume dropped more than 25 percent compared to the first half of 2007, Moody's said. There was a slight increase in both number and dollar value in June from the previous month, the company said.

The June uptick may be the first sign of stabilizing transaction volumes, which could point to future price stabilization, said Moody's Managing Director Nick Levidy. However, "it may also be a transient or seasonal effect, and future data will need to be examined in order to identify any trends." From Forbes.com

Copyright 2008 Associated Press. All rights reserved.

Every Hour a Store Closes

Click the photo for a full list (courtesy of CEO Economic Update). Here's the short roster:

Ann Taylor closing 117 stores nationwide.

Lane Bryant, Fashion Bug, Catherines closing 150 stores nationwide

Talbots will close all 78 of its kids and men’s stores plus another 22 underperforming stores.

Gap Inc. closing 85 stores

Foot Locker to close 140 stores

Wickes Furniture is going out of business and closing all of its stores. The 37-year-old retailer that targets middle-income customers, filed for bankruptcy protection last month.

Levitz - the furniture retailer, announced it was going out of business and closing all 76 of its stores in December. The retailer dates back to 1910.

Home Depot store closings 15 of them amid a slumping US economy and housing market. The move will affect 1,300 employees. It is the first time the world’s largest home improvement store chain has ever closed a flagship store.

Movie Gallery – video rental company plans to close 400 of 3,500 Movie Gallery and Hollywood Video stores in addition to the 520 locations the video rental chain closed last fall as part of bankruptcy.

Sprint Nextel - 125 retail locations to close with 4,000 employees following 5,000 layoffs last year.

Wilsons the Leather Experts – closing 158 stores

Bombay Company: to close all 384 U.S.-based Bombay Company stores.

KB Toys closing 356 stores around the United States as part of its bankruptcy reorganization.

CompUSA (CLOSED).

Info courtesy of CEO Economic Update.

Visit the CEO Economic Story Here.

Related Link, BUSINESSWEEK: Bankrupt Retailers: Pushed to the Brink. Changes in the law have sharply reduced retailers' ability to reorganize, driving many to liquidate quickly

Retail and Office Delinquencies Shoot Up

From CoStar:

Increased volatility in the office and retail sectors have led to a two basis point increase in U.S. CMBS delinquencies, according to the latest Fitch Ratings loan delinquency index. While overall delinquencies increased only mildly for the fifth consecutive month, the retail and office sectors led the index with net increases of $70.5 million and $62.2 million, respectively.

Despite relatively stable performance to date, Fitch remains concerned about the retail sector.

"An increase in retail bankruptcies and a continued decline in consumer disposable income are evident, though they have yet to impact retail performance," said Susan Merrick, managing director of Fitch. "High energy and commodity prices, rising unemployment, housing market weakness, and lower credit availability continue to negatively impact retail sales and are expected to dampen retail sector growth going forward. Recent store closings, including continued bankruptcy filings of tenants such as specialty retailer Linens 'n Things and discount-apparel retailer Steve & Barry's, will impact retail performance."

Retail loan delinquencies increased 25.7%...Click here for the rest of the article.