On January 26 th the CoStar Group presented their 2009 review of the U.S. retail market. Take heart! While the numbers aren't pretty, it's not all doom and gloom.
Shown below are the top 10 salient points from their webinar presentation. The positive points have been bolded:
1. Retail sales per capita are down about 7% from their peak in 2007.
2. The largest declines in retail sales since April 2009 have occurred in Furniture & Home Furnishing stores (-3.3%) and Building Materials & Garden Supplies (-4.1%).
3. Same store sales are improving from December of 2008 (down -8% to -10% from the previous year) to December of 2009 (0% to 2%).
4. The last 3 quarters of 2009 showed ever increasing leasing activity indicating an improving economy.
5. Free standing retail stores showed net absorption in 2009 of 6.2 million square feetwhile neighborhood shopping centers showed a negative net absorption of 8.5 million square feet.
6. Overall retail vacancy as of the end of 2009 was 7.6%; however newly constructed retail buildings delivered since 2006 have a 15.5% vacancy rate.
7. Retail cap rates bottomed out in 2006 at 6.2% and have increased to 8.0% as of the end of last year.
8. Shopping center inflation adjusted sales prices per square foot increased 11.75% annually from 1995 through 2008 but are down 40% since then.
9. The number of retail sales transactions under $5 million is down 57% since 2007 and those retail sales transactions over $20 million are down 81%.
10. Total annual returns from investing in retail properties are forecasted to slowly improve from a -27% annual loss in 2009 to a projected 14% annual positive return by the year 2012. About 2/3 rds of the projected annual return will result from the cash flow generated from the property and 1/3 rd from value appreciation.
The local trends are following more or less a similar path as the national trends based on a First Service PGP Valuation presentation on February 3 rd to the Oregon SW Washington CCIM Chapter. Grant Norling of PGP Valuation estimated the Portland/Vancouver retail vacancy rate at the end of 2009 at 6.2%. Last year had a negative net retail absorption of 565,000 SF with rents declining 3.6% from the previous year to an overall rental rate of $17.23 per SF. The most ominous part of Mr. Norling's forecast was his expectation that retail vacancy will top out at 10 to 12% or about double where it is at the present time. Yikes!
If true, the Darwinian law of the Survival of the Fittest will be in force. Those owners with the least leveraged properties and with the deepest pockets to withstand the negative cash flow will be the survivors. All others will need some extraordinary luck or opportune assistance from their lenders or investors to make it through till next year.
A CCIM sent me this by the name of Doug Marshall he is so good about filling me in on great information.
Comments(0)