Here are some news and notes on retail and retail real estate from around the Web today.
This story from CNN was making the rounds this morning, in part because of its misleading headline. The headline, “Is a commercial real estate bust inevitable?” plays right into the recent spate of stories asking whether commercial real estate is going to be “the next shoe” to drop. I think that angle has gotten played to death, especially since we’re more than two years into a commercial real estate correction. It’s not “going to drop.” Commercial real estate has dropped. The real questions at this point are, “When are we going to reach bottom?” and “What’s going to help the industry deal with the mountain of expiring debt now that CMBS is dead?” Those questions are actually what the CNN story is about, as it talks about Congressional hearings that occurred and asks experts what they think of the TALF and PPIP plans–ground we tried to explore with our May cover story. I agree with Real Property Alpha–this is a case of bad headline writing. In other coverage of the testimony, Zero Hedge recapped how the New York Fed Chairman drowned the talk of green shoots in commercial real estate.
The same cannot be said for loan demand. The SLOOS reports that the net fraction of loan officers reporting weaker demand in April 2009 was 60% for C&I and 66% for CRE loans, a historical low for CRE demand. Weak demand bears emphasis, as it indicates that the observed slowdown in overall credit is partly due to firms’ reluctance to borrow, and not entirely to banks reluctance to lend.
In sum, while green shoots may be sprouting in bank lending for commercial purposes—real estate or otherwise—it’s premature to start planning for a harvest. The combination of acute stresses in the financial markets, together with stresses on bank balance sheets, in the middle of the worst recession in a generation, should caution us from believing that recovery is just around the corner.
You can read the Fed Chairman’s full testimony here.
Bloomberg and NREI both recapped a conference call from Reis yesterday that concluded, among other things, that U.S. delinquency and default rates for loans sold as commercial mortgage-backed securities probably will continue to increase this year.
Citybiz Real Estate Baltimore has the latest GGP update, catching Bill Ackman saying GGP’s shares will be worth $20 to $35 per share after the REITs bankruptcy. Of course, considering Ackman owns a chunk of shares in the company, he does have a vested interest to say that. Chicago Real Estate Daily also has an Ackman/GGP item.
Levi Strauss & Co. will acquire the operating rights to 73 locations that were licensed to privately held Anchor Blue Retail Group Inc., which concurrently announced it is filing for Chapter 11 bankruptcy protection.
If the acquisition is made, the deal would significantly boost the jeans maker’s U.S. store count. As of Wednesday, Levi operated 17 Levi’s locations and seven Dockers outlet stores. Anchor Blue and its predecessor companies had been Levi’s outlet licensing partner since the early 1990s, according to Levi spokesman Jeff Beckman.
“The outlet channel is poised for continued growth over the near- and long-term,” said Levi’s President Robert Hanson. “We believe that this transaction will strengthen our ability to manage our brands’ positioning effectively in the outlet channel” and “provide a profitable growth opportunity” for the company.
Levi’s said the transaction, which involved Levi’s and Dockers Outlet by MOST stores, included inventory, fixtures and equipment associated with the store. The transaction is expected to close in July.
Meanwhile, Anchor Blue said as part of its bankruptcy filing it will close about 50 underperforming stores, with many locations in such hard-hit states as Arizona, California and Florida. The company had operated 177 stores in 12 states.
Dow Jones Newswires reported that the “bottom fell out of the market for securities backed by commercial real estate loans Tuesday afternoon after Standard & Poor’s raised the prospect of downgrades to the best-rated securities.” The WSJ carried a longer version of that story in today’s print edition.
About 10 days ago, Taubman Centers and Shop America Alliance LLC in partnership with the U.S. Department of Commerce/Office of Travel & Tourism Industries (DOC/OTTI) released the International Shopping Traveler.
Highlights of The International Shopping Traveler study results include:
• Nearly 20 percent of these travelers say they have already booked their next trip to the U.S. and an additional 50 percent are very likely to visit and shop in the next 12 months.
• For a large number of travelers, shopping influences destination choice. Overall, 30 percent said it was a factor in their choice of destinations, while 23 percent said it was a key reason for the trip.
• These travelers allocated a sizeable portion of total trip spend to shopping activities, spending on average $1,063 per person on shopping out of a total average of $3,692 per total trip, per person. While spending varies by market, the percent of shopping spend reported in the total trip spend was an average of 29 percent, and as high as 40 percent with Mexican Shopping Travelers.
Here is a post-RECon roundup of interesting stories from the past week or so. I’ve tried to categorize them a bit rather than presenting a single list since there are so many interesting links here.
S&K Famous Brands, which filed for bankruptcy in February, has now decided to close its remaining stores. Two weeks after filing, the firm moved to close about 30 stores. Now, three months later, it is shuttering the rest.
“In spite of our best efforts, the current economic climate left us with no choice but to close down the business. We’d like to thank all of our employees for their hard work and all of our loyal customers for their years of patronage,“ said Jonathan Tibus, Chief Restructuring Officer at S&K Menswear, in a prepared statement.
Although attendance is markedly down from the heights reached in 2007 and 2008, the mood of the annual ICSC RECon is far from morbid. According to ICSC, more than 30,000 people have registered for the event, although most attendees on the floor believe the actual attendance is 25,000 or less. Across the board, however, attendees will be leaving the show on a positive note.
What attendees have found is that the retail real estate industry is not in a hunker down mentality. The signs of economic stabilization that preceded the event went a long way to calming people’s nerves. And although everyone is less busy than in past years, meetings are still productive. There is a focus on trying to backfill vacancies and optimize the performance of existing stores and shopping centers. And there are select retailers looking to expand. The pace of expansion is far slower than in previous years, but it has not stopped completely. As a result, there is a great deal of competition to get those retailers, but company executives say the meetings here will produce tangible results. Read the rest of this entry »
I’ve been tweeting as regularly as I can from the ICSC RECon show floor. You can see my tweets here. Here I’ll provide some observations on what the first full day of the show was like.
First–the negative. Yes, attendance is down. ICSC is saying that registrations have surpassed 30,000 and may end up near 35,000 when it’s all said and done. However, few people I’ve talked to believe that many attendees are really here. A lot of people know folks that registered, but then didn’t make the trip. Most people think the real number is more like 25,000. A common refrain I’ve heard from companies is that they’ve cut their presence by half or more. Many companies also opted not to pay the huge expenses required for unpacking lavish booths. Many booths are scaled down. In some cases, firms just have tables and chairs and a handful of blown-up site plans or aerial photos. However, this is a minority, not the majority. There are also fewer plasma screens, booths with offices, goodies being handed out and other bells and whistles we’ve become accustomed to in recent years. ICSC did opt to occupy all three halls, but there are gaps. There are spaces that were booths in the past that have become ad hoc seating areas or have simply been curtained off. Also, we knew it was coming, but it’s incredibly odd to walk into the Central Hall and not see Simon Property Group and Westfield.
It’s been a long day. But ICSC’s RECon has just begun.
I started the day early in New York, flew into Las Vegas and immediately jumped into meetings at the Trade Expo. Among the people I talked too, two meetings stuck out as particularly interesting on Day One. Commercial real estate listing firm RealUp officially launched. The firm aims to be a low-cost competitor to LoopNet and CoStar. RealUp has partnerships with a couple of brokerages, including Sperry Van Ness, and is working to sign more up. It’s also backed by TerraServer and has provides sales comp data provided by MDA DataQuick. To try and gain a toehold in the market, the firm is giving free listings for the first three months. LoopNet and CoStar are formidable firms to take on and well entrenched in the commercial real estate listings space. But the backers of RealUp say that there’s a desire for a less expensive alternative. So that’s the void they’re trying to fill. It will be interesting to see how RealUp fares and evolves in coming months.
I also sat down with Pitney Bowes and talked about Know Your Faces. This program is aimed at retailers and restaurant operators as a way to easily survey shoppers and take steps to optimize locations. It streamlines the process of surveying patrons and gathering data on purchasing habits. It can let retailers know if locations are performing up to snuff or if there need to be changes in how customers are targeted. The information, no doubt, is also useful in deciding on sites for new stores. It seems to me that shopping center owners would want their tenants to be gathering data like this–to ensure the retailers in their portfolios were doing well and hopefully minimize the possibility of closings. There also would seem to be an opportunity to try and compare data across tenants in a center to ensure that the right mix of tenants is in place.
Overall, the Trade Expo seemed pretty quiet, but not dead. This isn’t a huge shock. Overall, attendance–best case–will be 30,000 this year compared with 40,000+ last year and about 50,000 in 2007. Also, a lot of attendees are compressing their trips to Monday and Tuesday. So I think we’ll see more density tomorrow on the Leasing Mall floor. I’m curious to see what the booths look like. I’ve heard a lot of talk that firms–rather than unpacking the lavish booths of past years–are scaling down. They’re keeping a presences, but it will be bare bones. I’ll let you know tomorrow what things look like.
Thursday’s News & Notes
by David Bodamer May 28th, 2009
Here are some news and notes on retail and retail real estate from around the Web today.
This story from CNN was making the rounds this morning, in part because of its misleading headline. The headline, “Is a commercial real estate bust inevitable?” plays right into the recent spate of stories asking whether commercial real estate is going to be “the next shoe” to drop. I think that angle has gotten played to death, especially since we’re more than two years into a commercial real estate correction. It’s not “going to drop.” Commercial real estate has dropped. The real questions at this point are, “When are we going to reach bottom?” and “What’s going to help the industry deal with the mountain of expiring debt now that CMBS is dead?” Those questions are actually what the CNN story is about, as it talks about Congressional hearings that occurred and asks experts what they think of the TALF and PPIP plans–ground we tried to explore with our May cover story. I agree with Real Property Alpha–this is a case of bad headline writing. In other coverage of the testimony, Zero Hedge recapped how the New York Fed Chairman drowned the talk of green shoots in commercial real estate.
You can read the Fed Chairman’s full testimony here.
Other stories from around the Web today:
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