Archive for January 14th, 2009

Beige Book Says CRE “Deteriorated”

by David Bodamer January 14th, 2009

Commercial real estate markets deteriorated in most Districts. Contacts in the Boston District described the commercial real estate market as grim and depressing, and market conditions continued to deteriorate in Richmond. In the Minneapolis District, a contact noted that the market remained in a downturn that has now lasted more than a year. Commercial real estate transactions in the Dallas District have reportedly ground to a halt. Leasing activity was minimal in the Boston District, continued to fall in the Philadelphia District, and was assessed as ranging from slowing to frozen in the Richmond District. Contacts in the Chicago District reported increases in sublease space. Office and industrial leasing is expected to remain steady through the first half of 2009 in the St. Louis District, but San Francisco reported that conditions in their commercial office market remained exceptionally weak. The New York
District reported that Manhattan’s office vacancy rate climbed to its highest level in two years. Contacts in the Chicago District noted elevated vacancy rates, and contacts in the Kansas City District expected higher vacancy rates going forward. Contacts in the Atlanta District also anticipate that more commercial space will become available.

Reports about commercial construction activity also were downbeat. In the Philadelphia District,
commercial construction activity continued to fall. Cleveland reported that construction backlogs have declined for some contractors. Commercial contractors in the Atlanta and Chicago Districts reported declines in building activity and noted that more projects were cancelled or postponed. In St. Louis, contacts in commercial and industrial construction predicted a challenging environment in early 2009.

San Francisco reported that commercial construction activity was very limited. Construction-related manufacturing contacts in the Dallas District reported that demand from commercial construction is shrinking rapidly.

Link.

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Gottschalks Seeks Bankruptcy; 2009 Store Closings So Far

by David Bodamer January 14th, 2009

Regional department store chain Gottschalks, which operates 58 stores and three specialty apparel stores in six western states, has filed for bankruptcy protection.

The Fresno, California-based company said it had negotiated $125 million in debtor-in-possession financing from a group of lenders led by GE Capital, a unit of General Electric Co.

Gottschalks plans to pursue options that include the possible sale of the company or another transaction, it said.

The company will conduct business as usual during the process, its chief executive said in a statement.

To date in 2009, here’s a summation of the major announcements from retailers. In the bankruptcies and liquidations section I’m listing the number of stores the chain owns and not necessarily how many the company is planning to close if they have not disclosed that yet:

Bankruptcies and Liquidations:

Potential Bankruptcies & Liquidation Impact: 432 stores

Announced Closings

Total Closings: 137 stores

Potential Impact of All Announcements to Date: 569 stores

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AIA Sees Drops in Commercial Construction in 2009 and 2010

by David Bodamer January 14th, 2009

The American Institute of Architects looked at forecasts from five sources to arrive at a consensus forecast for nonresidential construction in 2009 and 2010. The chart is interactive so you can see each of the five forecasts individually as well as the blended consensus.

aiachart

The downturn in the economy will translate into a steep drop for the nonresidential construction industry over the coming years. Construction activity will see an 11 percent decline in 2009, followed by an additional 5 percent drop in 2010. All the major commercial sectors will be hard-hit by this downturn, with declines expected to total between 25 percent and 35 percent for offices, retail facilities, and hotels over 2009 and 2010. Industrial activity—manufacturing and related distribution facilities—is slated to slow almost as much, with a 20 percent decline over this period. Institutional facilities should fare better, with two-year declines projected to run about 7 percent, and less than 5 percent for health-care facilities.

These forecasts were compiled recently from the AIA Consensus Nonresidential Construction Forecast Panel, comprising the leading national nonresidential construction forecasters. As the U.S. economy has deteriorated in recent months, their projections for construction activity have been revised down sharply. Economic stimulus proposals to revive our economy have concentrated on infrastructure investment and other facility modernization programs. However, until the broader economy recovers, the nonresidential construction industry is unlikely to see any reversal in activity levels.

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Sales Drop for Sixth Straight Month

by David Bodamer January 14th, 2009

Retail sales fell 2.7 percent in December according to the Commerce Department, the sixth straight monthly drop. Excluding autos and auto parts, sales were down 3.1 percent. November sales estimates were revised downward as well. Economists had expected a 1.2 percent drop.

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for December, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $343.2 billion, a decrease of 2.7 percent (±0.5%) from the previous month and 9.8 percent (±0.7%) below December 2007. Total sales for the 12 months of 2008 were down 0.1 percent (±0.4%)* from 2007. Total sales for the October through December 2008 period were down 7.7 percent (±0.5%) from the same period a year ago. The October to November 2008 percent change was revised from -1.8 percent (±0.5%) to -2.1 percent (±0.3%).

Retail trade sales were down 2.7 percent (±0.5%) from November 2008 and were 10.8 percent (±0.7%) below last year. Gasoline stations sales were down 35.5 percent (±1.5%) from December 2007 and motor vehicle and parts dealers sales were down 22.4 percent (±2.3%) from last year.

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