Commercial Retail Real Estate in a Stronger Position in 2010

By Adam Lyons in : News // May 26 2010

Colliers’ Spring 2010 Retail Highlights report shows positive occupancy growth in 43 of 47 markets surveyed; decreased construction activity in all but a few markets; and a rising but soon-to-stabilize retail vacancy rate.

“It appears that contraction in the U.S. retail real estate market is finally winding down, but not completely over,” remarked Garrick Brown, Colliers International’s U.S. retail research director and complier of its Spring 2010 Retail Highlights. “We expect store closures to continue through year-end; but the return of credit and capital, coupled with an uptick in M&A activity, could be a much-welcomed shot in the arm for U.S. retail real estate.”
“We continue to embrace the tenet that ‘less bad is the new good’ when it comes to retail real estate in 2010,” remarked Pat Duffy, chairman of Colliers Retail Services Group. ”Absorption remains negative, but on the upswing in the majority of markets we surveyed. Construction levels will continue to drop, but we feel an uptick in building could commence as early as 2012. And retail rents are trending downward, but the rate of decline is slowing. Indeed, with an increasing pool of tenants looking to expand and take advantage of newly available credit and capital, we could see positive changes before the year is out.”

Top-line findings from Colliers International’s Spring 2010 Retail Highlights

Resurgence of mergers & acquisitions, especially in the restaurant space: Deal activity has dramatically increased from 2009 levels, and so far, much of this action has concentrated around restaurant chains such as Rubio’s, Carl’s Junior/Hardee’s and Dave and Buster’s. Market chatter has it that a number of restaurant chains such as Jack in the Box, Jamba Juice, Red Robin and McCormick & Schmick’s may be among the next targets of private equity investors.

The return of credit and capital: An increasing amount of credit in the marketplace will be an important force in curbing retail failures. For example, in April, bookseller Border’s secured a new $700 million credit facility, replacing an existing arrangement which would have matured next year. Other recipients of beneficial fresh credit include grocery giant SUPERVALU and jewelry chain Zale’s. Overall, the lending atmosphere has loosened considerably, and as the economy continues to recover, we expect more liquidity in the marketplace.

More dollar daze! Colliers has seen a huge increase in planned new retail stores in just the past three months. The lion’s share of this is attributed to dollar stores. Dollar General has plans for 600 new stores this year alone; Dollar Tree/Deal$ has 235 stores planned; and Family Dollar is hoping to open as many as 200 units. In aggregate, we expect dollar store chains to add as many as 1,500 stores in 2010.

Footprint experimentation: We also anticipate growth from retailers who are increasingly willing to experiment with their footprint templates to avail themselves of deals, and to cash in on more vibrant urban markets. Chains experimenting with smaller footprints include BJ’s Wholesale, Cabela’s, Costco, Petco, Target and numerous restaurant chains.

Dense urban retail first to recover: Amid footprint experimentation of large national chains looking to gain entry to urban markets from which they were previously priced out, we expect that in terms of retail product type, urban streetfront retail in dense markets like New York City, Chicago and San Francisco will be the first to recover.

Grocery wars heat up: Consumers are exhibiting a new frugality, and as such, stores who emphasize discount grocery are experiencing modest growth. Target (which added 150 of its P-Fresh grocery concepts to existing stores in 2009) will be adding another 350 this year. 7-Eleven, heretofore known as a convenience store, will expand its fresh food offerings. Dollar stores are also augmenting their formats with small grocery concepts. And Wal Mart, the world’s largest retailer, now earns 51 percent of its income from grocery sales. All this activity puts increasing pressure on the traditional grocery industry.

For a link to the full report, please visit: http://www.colliers.com/Country/UnitedStates/content/RetailNaHighlightsSpring2010.pdf

http://cpchampion.com Adam Lyons
At least Paris is still the most ridiculously expensive rent on earth @ 1,255.90 a square foot!
http://cpchampion.com Adam Lyons
At least Paris is still the most ridiculously expensive rent on earth @ 1,255.90 a square foot!