Here are some other news and notes on retail and retail real estate from around the Web today.
Bloomberg recapped a new CBRE report on retail rents on the world’s most expensive streets. The verdict? “Store rents tumbled in the world’s most expensive locations in the first quarter and will continue to decline through the middle of 2010.”
New York City kept its top rank from a year earlier as the most expensive retail market even as asking rents on Manhattan’s Fifth Avenue fell 10 percent to $1,800 a square foot per year, the Los Angeles-based commercial broker said in a report today. Rents in Hong Kong’s most desirable shopping area ranked second at $975 a square foot and Moscow was third at $790. Paris and Tokyo followed at $776 and $771, respectively.
“Everything cratered in the fourth quarter and that carried over into the first,” Ray Torto, global chief economist for CB Richard Ellis, said in an interview. “This is not a landlord market.”
U.S. chain stores posted their best week since the beginning of the year, according to ICSC and Goldman Sachs. Sales rose 1.6 percent week over week.
Consumer confidence fell in June following two months of gains.
CNBC previewed the unveiling of further details of the Treasury Department’s PPIP program, which will take place tomorrow. There will be at least nine participants, including a joint venture between GE Capital and private investor Angelo Gordon & Co.
Bloomberg has not one but two videos about Sears’ new Buyer Protection Program. The Associated Press also reported on the program. The program sounds a lot like what some car companies are doing by providing consumers with a backstop in the event that they lose their jobs within a certain time frame of making a purchase. Hyundai especially has been able to maintain its sales better than competitors in part because of its Assurance Plan.
The free program, which starts Monday and runs through Aug. 1, covers appliance purchases of more than $399 made on a Sears card by cardholders who lose their job. Cardholders must have held a full-time job for at least 60 days when the appliance was purchased.
If a customer loses his or her job, the program will credit 1/12th of the purchase price to the account for each month the cardholder is out of work. If the person is still out of work one year after the purchase, he or she will receive an account credit for what’s left of the purchase amount and get to keep the appliance without any further payment obligations.
One constant piece of commentary I heard at ICSC’s RECon show in May was that retail property owners are trying whatever strategies they can think of in attempts to boost traffic at their centers. They are increasing the number of events. They are looking at traditional marketing media like local radio and television stations and newspapers. The more experimental owners are trying email blasts, Tweets, texts or setting up Facebook pages for individual shopping centers.
Marketing Director Mary Stahl says Saturday’s test seems to be working. “We’re all trying to find ideas and ways to drive traffic into the mall and you have to think out side the box right now.”
Styles for Less store manager Belinda Pacheco hopes to see more mall promotions like this. “It brings people in. It shows we’re trying to do different things to try and get their attention.”
Stahl say it’s an expansion on an idea from retail stores in Chicago who report a 30% increase in foot traffic. “Our main objective is to let people know that it’s a wise move to come to this mall and spend their money. They’re going to get the best value.”
The tactic is sure to get some attention. It already has, clearly. The question, however, is whether doing things like this brings in people that are actually going to spend money at a property or whether it just draws people that have nothing better to do than gawk at models. I don’t see, for example, how having live models in a mall gets the message across that shoppers “are going to get the best value” by shopping at the property.
Events and publicity stunts, to me, seem like a shot in the dark, especially in this economic climate. People that don’t have money to spend but are looking for something to do can be drawn in by mall events. It will boost traffic, but not necessarily do a thing to help retailers get better sales numbers. In the end, it seems like owners need a more sophisticated and targeted approach that delivers not just masses of people but specifically engages consumers looking to spend money. That, ultimately, is what tenants need. And the ability to deliver paying customers can become a selling point for a landlord that separates your center from the property down the road, which does not have this capability.
Here are some other news and notes on retail and retail real estate from around the Web today.
The Wall Street Journal’s Heard on the Street commentary highlighted the potential damage commercial real estate may yet wreak on bank balance sheets. It noted that some banks have accounted for no hits to their commercial real estate loan portfolios despite heaps of evidence of massive distress in the sector.
Seeking Alpha asks whether Sears Holdings should consider becoming a REIT.
ICSC published its latest Retail Real Estate Business Conditions report. Among other things, the report highlights the jump in the U.S. personal savings rate.
One of our sister publications, Business Finance has a look at sale-leasebacks as a strategy for firms looking to monetize their real estate holdings.
Our Chart of the Week looks at the latest Moodys/REAL commercial property index numbers for retail. The retail index fell to 1.43 in the first quarter—the lowest level since the fourth quarter of 2004. (A score of 1.00 represents where prices were as of the fourth quarter of 2000.) The index peaked at 1.68 in the third quarter of 2007. In the five quarters following the peak the index fell by an average of 0.02 points per month. The drop from the fourth quarter of 2008 to the first quarter of 2009, however, represented a 0.13 point drop in the index.
Dow Jones Newswires has a look at the trend of pop-up shops in urban markets. “Retailers are embracing the concept for a broader reach in cities like New York and Chicago as shoppers look for bargains or special items. Landlords see the short-term deals as better than no deal at all, receiving some income from hard-to-fill dark stores as they hunt for permanent tenants.”
This is a trend we’ve tried to track in recent years, particularly the shops that have showed up in the New York area. For example, Teen Vogue operated The Haute Spot at the Mall at Short Hills in New Jersey in December. Target had four bodegas in New York city last fall. Toys ‘R’ Us operated a pop-up store in New York during the 2007 holiday shopping season. JC Penney had a shop in Times Square in spring 2006. We also ran a feature story on pop-up shops in February 2006.
Here are some other news and notes on retail and retail real estate from around the Web today.
Dress Barn has agreed to acquire Tween Brands in a $947 million all stock transaction. You can read the details here.
If you’ve got cash, now is the time to buy. That’s the position this article from CoStar takes. The article is a roundup of thoughts from commercial real estate investors and other pros from around the country.
An open letter from Tracy Mullin, president and CEO of the National Retail Federation, explains why the NRF has backed off merger talks with the Retail Industry Leaders Association.
Burger King has trotted out a particularly sexist ad campaign that the Retail Doctor Bob Phibbs has an excellent post about.
There’s cutting edge fun-loving and bleeding-edge pandering.
Compare all of this to the brilliantly executed McCafe launch last month which has Starbucks, Dunkin’ Donuts and others scrambling to stay relevant to a customer base suddenly considering and returning to McDonalds in the morning. McDonald’s got it right – grow your audience, don’t narrow it like BK is doing.
The trouble with desperation marketing is people can smell it on you and choose to avoid you. It’s time for a change at Burger King. What do you think?
RetailWire has a discussion up centered around Target’s new approach to groceries. “[T]he company appears intent on getting consumers used to the idea of expecting to buy groceries at prices well below most other food outlets.”
Deal Junkie posted this earlier today. It’s an interview with Philip Blumberg of Blumberg Capital Partners at the 2009 Global Real Estate Summit in New York. He says banks are in part not lending and holding onto TARP money because they know they will have huge writedowns to deal with as a result of commercial real estate.
Here are some other news and notes on retail and retail real estate from around the Web today.
Yesterday, the retailers said they have received pledges from local celebrities, athletes, and other business owners to buy the lease from General Growth Properties Inc. and run the property themselves. They estimate they need to raise at least $50 million to have a chance at winning control of the Marketplace and stabilizing its operations, after years of unsettling changes and an influx of national chains.
“It’s really about having locals gain control of this much loved landmark, which is not an ordinary piece of real estate,’’ said Carol Troxell, who runs several food shops there and is a member of the group raising funds, the Friends of Faneuil Hall. “Its historical significance to Boston makes it deserving of a local group of people who understand the market and are willing to maintain the vision of the property.’’
MBA’s NewsLink features an an interview with Joe Franzetti, managing director of debt advisory services at Cohen Financial, who talks about some of the pressures smaller banks will face as a result of too much exposure to commercial real estate.
Reuters reported on the latest AIA Billings Index. The index for May held steady with April’s number. Calculated Risk has more on the index, including a long-term chart, which I’ve copied below. You can also view AIA’s release on the results here.
(Click for larger version.)
Victor Calanog says the worst is still to come for retail real estate in a piece for Scotsman Guide’s Commercial Edition.
I attended an event this morning held by Cityscape Connect called “Looking Beyond the Crisis.” I posted some quotes from the event live to the Retail Traffic twitter. I thought I’d take a minute to put some of these quotes into context.
The panel was moderated by Jeffrey Finn, president & CEO of NAI Global, and featured Gerald Marshall, president & CEO of Amerimar Enterprises, Gerald Hannon, partner & head of real estate with Baker & McKenzie LLP, Ruth Barone, partner with Glenmere Capital Partners, David Lynn, managing director with ING Clarion and Mark Lippmann, director of Praedium Group.
Overall, the mood was far more pessimistic than I had expected. There was no notion of “green shoots.” If anything, all the panelists expected commercial real estate to get much worse before it gets better. There was widespread belief that while the government’s programs may be working to stabilize the banks and easing panic, the financial system is far from healthy. The programs are propping up the institutions and prolonging the process of recovery. Marshall blasted the government for not pursuing a solution like the Resolution Trust Corp. or using the FDIC more aggressively and said instead the U.S. was opting for a slow and painful process. As Marshall put it, “Instead of taking the model that worked in the 1990s, we’re taking the band aid of slowly and torturing the economy.” Hannon also said that TARP and TALF have had “no effect” on commercial real estate as far as he could tell.
David Lynn had a slightly more positive spin. He also expressed skepticism that the recovery could follow the same path as what happened with commercial real estate in the 1990s, especially with fundamentals continuing to erode. Roughly, he talked about the economy slowly recovering in 2010, jobs finally turning around in 2011 and perhaps commercial real estate being poised to grow in 2012. Lynn also argued that programs like PPIP and the other TALF and TARP measures need more time before we draw conclusions.
Aside from the discussions of government policy, there was a consensus that banks largely are trying to delay the days of reckoning when they will have to recognize losses and writedowns by extending loans as much as they can. The phrase “pretend and extend” came up more than once, as in, banks are pretending that borrowers can pay off their loans and therefore granting extensions to them. However, no one thinks that can go on forever. As Barone described the process of dealing with troubled borrowers, “Banks are granting extensions at low rates and hoping the economy recovers quickly enough to get the loans performing. But things have gotten worse instead of better.” Lynn agreed that banks “are playing for time” and waiting for a value floor. But right now no one really knows what commercial real estate values are because the volume of investment sales transactions is too low to truly draw conclusions. All anyone knows is that cap rates are much higher than they were at the peak of the market in 2007–perhaps as much as 300 to 350 basis points. But by not foreclosing on troubled loans, all this process is doing is keeping values of commercial mortgages at “unsustainable levels.” At some point, the losses need to be realized. So panelists expected the long awaited boom in distress to materialize in 2010.
And with so much uncertainty on existing loans, lenders are being extremely cautious with new ones. Loan to value ratios may be as low as 50 percent. The largest financing any of the panelists had seen done in recent months was about $75 million. Marshall said, “Lenders are only taking safe risks and they’ll only feel comfortable to do more when they know commercial real estate values have hit a bottom.”
Lastly, the panelists didn’t think the CMBS market would ever come back the way we saw it at the peak of the market. It may come back in a simplified and diminished form–but even that will take four to six years. That leaves a giant hole on the funding side that no one quite knows what will fill. So ultimately it is the combination of a giant funding gap, the deleveraging that is occurring and the drop in property values that is making the situation so troubling now.
I’ve been experimenting with Clip Syndicate and set up Retail Traffic Videowire. The feed will include video clips–largely Bloomberg reports and reports from local television stations–that should be of interest to Retail Traffic readers.
Here’s one example of the kinds of videos I’ll include there. It’s a report on the luxury goods market and the outlook for the sector in light of the ongoing economic crisis. I’d like to get some feedback on whether this is something readers find useful. Go check out the feed and let me know what you think.
Madison Marquette published a piece today looking at the risk outlook of various retailers to gauge their relative risk of bankruptcy or other major restructuring that could impact commercial real estate owners and operators. It’s a useful report with observations on many major chain retailers currently facing pressures. It was posted to the Places blog earlier today. I’ve reposted the report below.
Abercrombie’s downfall with Ruehl (and the considerable sales drop at other Abercrombie brands of late) came from their arrogance to refuse to acknowledge the state of the economy and price their clothes accordingly – or at the least, provide sales or discounts or specials. For almost a year now Abercrombie’s President and CEO, Mike Jeffries has continually stated that Abercrombie (and affiliated concepts) are premium brands, discounting them or placing sales on their products – even temporarily – will damage the reputation of the brands and make it more difficult for the brands to return to their premium status.
Here are some other news and notes on retail and retail real estate from around the Web today.
The Retail Doctor wrote a post with some interesting tips for retailers looking for good locations: Check the trash.
Find out the trash collection days and times for your intended area. Go and observe how many have put their trash out prior and you’ll have a good indication of how dynamic your neighborhood really is.
Wal-Mart is having some trouble with its in-store clinics, according to Business Week. Two years ago it said it planned to open clinics at 400 of its stores by 2010. By February 2008, the firm had been able to get 78 up and running so far. Now, however, it is down to 31 due to failed venture-capital collaborations, a few faulty partnerships, and a reassessment of the business model. In other health and retail news, the Mayo Clinic is opening a location at Mall of America. Officials aren’t sure yet what services the site will offer, but they could include diagnostic screenings, wellness counseling and other services that might direct patients to the home campus in Rochester, Minn.
Aeropostale, one of the few bright spots in the apparel sector, is launching a new kids concept called P.S. VMSD has more. “The company says the concept offer trend-right merchandise at compelling values within a fun, playful and inviting store environment. The first P.S. from Aeropostale store is planned to debut in June, with an online component shortly thereafter.”
You’ve probably noticed of late that Pizza Hut has been hawking everything but its pizza. It’s pushing its P’Zone thing and its pasta. This, apparently, was in a run-up to a adding a secondary branding mark for the franchise. As the Consumerist reports, it will now also be known now as “The Hut”.
There were also more stories looking at how REITs have raised cash. This is an angle that’s gotten picked up by a lot of publications, including us. Today, both Fortune and the New York Times wrote about the trend.
Bruce Ratner had originally had agreed to pay $100 million to the Metropolitan Transit Authority for a nine-acre site where a railyard is located, but with the economy slumping, the developer had asked to defer some of the payment. The revised agreement, which became public on Monday at a meeting of the authority’s finance committee, would call for Mr. Ratner to pay $20 million up front for the property, and $80 million in deferred payments for the air rights — a payment scheme that would stretch out until 2031.
Here are some news and notes on retail and retail real estate from around the Web today.
The big news of the day was Eddie Bauer’s bankruptcy. In addition, Abercrombie & Fitch is shuttering the Ruehl concept. You can see how that affects the store closure count for the year in a post from earlier today.
George Whalin raves about Apple’s continued success. Specifically, Whalin writes about Apple’s new store design.
The most recent move is to a new store design. The first of the new stores recently opened in Scottsdale, Arizona. Visually spectacular, with a 75-foot-long skylight, the glass front and rear allows people to see all the way through the store. It is unlikely they will be able to do the same in most of their other stores, but it certainly adds to this eye-catching design.
The New York Times‘ DealBook wrote of a brewing battle at Children’s Place. It’s former CEO began a proxy contest last month to place three candidates on the company’s board. Current management, naturally, is resisting.
TWICE–that’s the cleverly named “This Week In Consumer Electronics”–writes up Best Buy’s radical store remodel plans. Its planning to “alter its store layout to emphasize services and test new product categories.” Interestingly, a Best Buy at 23rd and 6th Ave. in New York City recently shifted some things around. I wonder if that was a test of this new layout.
Have some extra space in your mall parking lot? Call JetBlue.
It has launched a new campaign in the parking garages of two malls – in Northern Virginia and Los Angeles – with installations meant to bring the in-flight experience to life. The installations include with in-flight monitors and airplane seats, all set in an environment meant to reproduce the feeling of being in the clouds.
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Restaurants’ Long Losing Streak; Consumer Confidence; PPIP Details (Tuesday’s News & Notes)
by David Bodamer June 30th, 2009
The National Restaurant Association’s Restaurant Industry Outlook Softened in May as Restaurant Performance Index Posted First Decline in Five Months.
Calculated Risk noted this marks the 21st straight month of traffic declines at restaurants. The blog also produced a chart of the index going back to 2002, which you can view below.
(Click for larger image)
Here are some other news and notes on retail and retail real estate from around the Web today.
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