Archive for the ‘Research’ Category

January Sales Better Than Expected

by Elaine Misonzhnik February 2nd, 2012

The same-store sales numbers for January are coming out today and they seem to be pretty good.

Thomson Reuters estimates that same-store sales rose 4.2 percent for the month, much higher than expected, according to The Wall Street Journal. Target, Kohl’s and Saks Fifth Avenue surprised analysts with strong results, while specialty retailers including the Gap and Wet Seals reported sales declines.

Thomson Reuters surveyed a total of 20 chain.

According to ICSC, same-store sales rose 4.8 percent in January, driven primarily by wholesale clubs, luxury stores and discounters. Costco, for example, reported growth of 8 percent, Saks of 10.5 percent and TJX of 7 percent.

Kantar Retail, a Columbus, Ohio-based retail consulting firm, estimates growth of 4.9 percent, based on results from 21 retailers. Particularly heartening is the fact that the gain occured in spite of unseasonably warm weather and tough year-over-year comparisons, according to Kantar’s researchers.

“Whether January’s growth can be sustained may depend on whether shoppers’ spending intentions show more signs of stalling out in the months ahead. That underlying trend appears to be overwhelmed at the moment by the mixed retail and economic reports,” said Frank Badillo, Senior Economist.

No Comments Related Topics: News, Research, Trends |

2012 Forecast: More of the Same

by Elaine Misonzhnik December 12th, 2011

ChainLinks Retail Advisors, a retail-only real estate services firm, has just released its U.S. National Retail Report 2012 Forecast, which predicts another slow year ahead for the sector.

According to the report, there will be fewer retail bankruptcies in 2012 than there were in 2011 and the national vacancy rate will go down. But many of the retailers that propelled the sector’s growth in the past few years, including chains like TJ Maxx, Marshall’s and Ross Dress For Less, might slow down expansion next year. Most of the growth will come from the dollar stores, fast food restaurants and fast casual chains.

The report’s authors caution that:

Looking forward, we continue to have strong concerns over mid-priced retail chains.

Chains caught in the middle will be where the most contraction occurs and though we don’t expect retail closures to approach last year’s levels, they will continue to mitigate growth across the board. Vacancy will shrink in 2012, but it will be at a slow pace, measured more by basis points than by percentage points.

No Comments Related Topics: Commentary, Management & Leasing, News, Research, Retail, Retail Real Estate, Trends |

Dollar Chains Ahead in Race for Market Dominance

by Elaine Misonzhnik December 8th, 2011

In spite of putting forth their best efforts, drugstores trail dollar stores in the war for U.S. consumers. A report published earlier this week by brokerage firm Colliers International looks in-depth at dollar stores’ rapid expansion over the past few years and finds that they’ve been opening new stores at a faster pace than most of their competitors.

According to a post on Merchandising Services Blog, today there are approximately 21,500 dollar stores operating around the country, while national drugstores number 19,700 locations. Family Dollar, with 6,800 stores, and 99c Only Stores, with 285 units, would seem to pose the biggest threat to the drugstores as they generally take locations in urban environments, the drugstores’ most established turf.

Dollar General, on the other hand, prefers rural communities with fewer than 20,000 residents. The strategy often allows the chain to be the only necessity retailer in the area, eliminating the need to nab the best piece of real estate and pay top dollar to open new stores.

The last of the four major national chains, Dollar Tree, focuses on the suburbs.

Regardless of where the dollar stores are based, landlords love them. In addition to bringing in steady foot traffic, they willingly go into second, third and fourth generation spaces and have limited need for tenant allowances because of their modest buildouts. The Colliers report notes that the dollar stores have been able to close very aggressive deals, commanding some of the lowest retail rents around:

This is occuring even in markets where landlords, especially those with better-performing centers, are beginning to see some pricing power return to them. Depending on the chain, base rents can run as low as the high single digits for a 10-year term. Rent step-ups are rare during the first five years; tenants will consider a 10% bump (2% per year), beginning in year six, for the balance of the term.

No Comments Related Topics: Management & Leasing, Research, Retail, Trends |

November Same-Store Sales Disappoint

by Elaine Misonzhnik December 1st, 2011

Turns out stellar Black Friday sales really don’t mean a stellar month.

Thomson Reuters had just released a tally of results for 20 retail chains for the month of November, and same-store sales came in at 3.1 percent–a respectable figure, but still below the 5.5 percent increase recorded in November 2010.

Some retailers were able to profit from super early openings and deep discounts over the Black Friday weekend, but analysts worry that come December, that sales momentum will prove unsustainable.

“Our concern is that deep discounting in November pulled forward sales out of December,” said Ken Perkins, president of Retail Metrics.

ICSC also reported that November same-store sales showed the weakest increase since March of this year, at 3.2 percent.

Once again, wholesale clubs were the clear winners, with growth of 9.0 percent, followed by luxury department stores, at 6.5 percent. Same-store sales at apparel stores rose only 0.8 percent. ICSC blamed the poor performance on unseasonably warm weather, as well as tough comparions to same-store sales posted last November. The association included results from 21 retail chains in its roundup.

Same-store sales numbers posted by RetailSails and Kantar Retail were very similar. Both tallied 22 retailers and came up with an increase of 3.3 percent. RetailSails took the lackluster sales growth as another indication that the consumer still feels uncomfortable spending and will only shop for discretionary goods when offered steep discounts.

Kantar Retail offered a somewhat more hopeful take. According to Frank Badillo, senior economist with the firm:

“Retail sales growth into the holidays is reflecting the spending intentions of shoppers. They have pulled back on their spending plans from earlier in the year, but they are loosening the purse strings a bit as the holiday approaches.”

No Comments Related Topics: News, Research, Retail, Trends |

Black Friday Sets Sales Record

by Elaine Misonzhnik November 28th, 2011

The holiday shopping season is off to a great start as sales for 2011 Black Friday weekend came in at a record-setting $52.4 billion. The National Retail Federation reports that 226 million people visited bricks-and-mortar stores and shopped online in the days after Thanksgiving, spending money on clothes (51.4 percent of shoppers), electronics (39.4 percent of shoppers) and home decor items (21.3 percent of shoppers.)

“Stuffed to the brim from their holiday meals and eager to shop, more consumers than ever turned out for retailers’ Black Friday promotions, a promising sign for the economic recovery,” said NRF President and CEO Matthew Shay. “After an historic holiday weekend, retailers know the holiday season is far from over and will continue to look for ways to excite holiday shoppers and build on the momentum we’ve seen thus far.”

Shopper Trak reports that during Friday alone shoppers spent $11.4 billion–the biggest dollar amount ever. Foot traffic during the day went up 5.1 percent over the traffic recorded last year.

Nevertheless, the blog RetailSails warns that Black Friday sales don’t always serve as an accurate predictor of how the entire holiday shopping season will play out. The blog points to 2008, when shoppers also spent a record amount of money over the Black Friday weekend, then tightened their purse strings for the rest of the year.

What’s more, The Big Picture warns that many of the sales figures were inflated by dubious counting measures. According to The Big Picture:

We actually have no idea just yet as to whether, and exactly how much, sales climbed. The data simply is not in yet. The most you can accurately say is, according to some foot traffic measurements, more people appeared to be in stores on Black Friday 2011 than in 2010.

Certainly, a lot of the sales this year, as during the previous few years, were driven by early openings and super promotions. Walmart, Target, Best Buy and Toys ‘R’ Us stores opened at midnight on Thursday, according to Business Insider, as did Mall of America. About 15,000 people showed up at the mall that night, the largest Black Friday crowd ever. Unseasonably warm weather also helped bring people into stores.

Large crowds and blockbluster deals, however, led to some ugly behavior by shoppers across the country. A woman shopping at a Walmart store in Los Angeles, for instance, used pepper spray to keep others away from the items she wanted to buy. In Michigan, a teenager was trampled on as she got caught in the rush to snag discounted electronics. In Alabama, police had to use a stun gun to subdue an unruly, intoxicated shopper. In yet another incident, a man was shot for refusing to hand over his family’s newly purchased loot to robbers.

The Business Insider has put together a list of videos chronicling multiple Black Friday scuffles.

The question for retail analysts today seems to be if we should pay more attention to the record-breaking sales volume, or to the desperation people are showing in the fight for discounted goods.

No Comments Related Topics: News, Research, Retail, Trends, Video |

Same-Store Sales Trend Lower in October

by Elaine Misonzhnik November 3rd, 2011

Worries about the state of the U.S. economy finally worked their way into same-store sales numbers in October, after several months of surprising stength.

Reuters reports that the U.S. same-store sales index rose only 3.5 percent during the previous month, more than a percentage point below expectations.

Even as the stock market rose, unemployment barely budged, and shoppers faced a barrage of scary headlines last month that gave them pause about spending, experts said.

“This uncertainty, the news changing every day, it causes a freeze,” said Wharton School professor Barbara Kahn.

ICSC also reported the slowest month since March 2011, with same-store sales growth of 3.7 percent. Apparel stores posted the worst results, with flat growth. Wholesale clubs performed the best, with growth of 9 percent during the month. Results in most other retail sectors fell below 5 percent.

ICSC’s results were based on a survey of 25 chain retailers.

Kantar Retail, which tallied 24 chains, mostly apparel and department stores, reported that its same-store sales index rose 3.9 percent. Like everyone else, Kantar attributed the lackluster results to consumers’ worries about the economy.

The blog Retail Sails also reported a 3.9 percent increase, based on its survey of 23 retail chains. According to Retail Sails:

Laggards in October included the usual suspect The Gap (-6%), who announced recently they would close roughly a quarter of their U.S. stores to focus on overseas growth, J.C. Penney (-2.6%) which continues to lose market share to Macy’s (+2.2%) and Kohl’s (+3.9%), Wet Seal (-9.7%) and Bon-Ton (-10.2%).

No Comments Related Topics: News, Research, Retail, Trends |

September Same-Store Sales Show Surprising Strength

by Elaine Misonzhnik October 6th, 2011

In spite of serious market-wide worries about another economic downturn, U.S. retailers posted very strong gains in September.

Thomson Reuters estimates that retail sales rose 5.1 percent during the month, more than its roughly 4.5 percent figure for August. The strong results raised hopes for the upcoming holiday shopping season.

I’m not saying it’s going to be going to an exceptional or a blow-away holiday, but I wonder if people are being overly pessimistic,” Madison Riley, managing director for retail consulting firm Kurt Salmon, said after reviewing retailers’ September reports.

According to ICSC estimates, September same-store sales numbers were the strongest since June, at 5.5 percent. ICSC reported that warehouse clubs as a group posted growth of 12 percent, followed by luxury stores at 10.4 percent. Sales at apparel stores grew the least, at 2.3 percent.

ICSC tracked 26 retail chains in its research.

Kantar Retail, which tracks 25 retail chains, most of them apparel retailers, reported September same-store sales growth of 5.7 percent.

“The resiliency of shoppers in September, especially at apparel and department stores, partly reflects unavoidable back-to-school purchases amid higher apparel prices. At the same time, sales are holding up as shoppers’ spending intentions fall off much less dramatically than the steep falloff in consumer confidence.” said Doug Hermanson, Kantar Retail Economist.

The blog Retail Sails credited back-to-school promotions and discounts on fall apparel items for a 5.7 percent rise in same-store sales. Retail Sails tracks 24 retailers.

Of course none of the above figures include same-store sales reports from Wal-Mart Stores Inc., which accounts for roughly 6 percent of all U.S. retail sales. Wal-Mart stopped reporting monthly same-store sales results last year.

No Comments Related Topics: News, Research, Retail, Trends |

August Same-Store Sales Reflect Impact of Hurricane Irene

by Elaine Misonzhnik September 1st, 2011

August same-store sales rose by between 4.5 percent and 5.0 percent.

The gains were not divided equally, however, as specialty retailers benefited from back-to-school shopping, while department store operators suffered a drop in weekend traffic at the end of the month because of Hurricane Irene.

Macy’s Inc. (M), Saks Inc. (SKS) and other retailers closed locations along the East Coast as Hurricane Irene flooded roads, shut airports and cut power to more than 8 million homes and businesses. The storm struck the weekend before the Labor Day holiday, traditionally a key time for back-to-school shopping, Retail Metrics said in the report.

“Overall, back-to-school sales are strong,” Jennifer Davis, an analyst at Lazard Capital Markets in New York, said in an interview. “But it’s difficult for department stores to recover from that closure, especially during such a key shopping weekend.”

Despite the numbers, as we’ve written in other monthly roundups, it’s important that we remember that the pool of retailers that still report same-store sales numbers is considerably smaller than it once was. Less than 30 retailers use the metric (down from more than 70 a few years ago). Wal-Mart stores, which singlehandedly accounts for roughly 5 percent to 6 percent of the overall retail pie, only reports quarterly figures today. And it has reported comparable store sales declines (excluding fuel sales) for nine straight quarters.

Were they still in the monthly matrix, the figures would look quite a bit different.

Our look inside the monthly reports is after the jump. Read the rest of this entry »

No Comments Related Topics: Commentary, News, Research, Retail, Trends |

A Look at the Sunshine State’s Retail Real Estate

by David Bodamer August 15th, 2011

Florida’s retail real estate scene is expected to slowly improve throughout 2011, according to Marcus & Millichap Real Estate Investment Services. It’s a much brighter scene than when we checked in two years ago.

A walk through some recent Marcus & Millichap market reports gives us some results to chew on. Here are stats from five Florida markets–Tampa, Orlando, Miami-Dade County, Palm Beach County and Broward County–showing vacancy and rental trends by submarket.

A look through various submarkets reveals a mixed picture. Vacancy rates have improved in the last 12 months in some markets and worsened in others, although the magnitudes of the year-over-year changes are not dramatic in either direction. Rents have shown greater stability and in most markets are within 1.0 percent of where they were a year ago. Miami-Dade County boasts some of the submarkets with the lowest vacancy rates in the state while Broward County has several submarkets where the vacancy rate exceeds 10 percent. Miami-Dade also has the most expensive rents while Tampa is the most affordable.
In terms of outlook, here are some commentary excerpts from the four reports along with charts.

Broward County

Property operations continue to improve notably in Broward County, but the deliberate pace of the recovery will minimize gains in occupancy and rents this year and defer a more robust turnaround until 2012. While resumed job creation generated a healthy 6 percent year-over-year increase in retail spending through the first quarter, space demand has strengthened modestly in response as retailers remain hesitant. A slack pace of household growth and a still-recovering housing market continue to limit the number of new store openings and will support a steady, albeit slow, increase in occupied space over the rest of 2011.

…

Investors’ demand for decent yields and capital preservation continues to support a fluid single-tenant, net-leased investment market in the county. Nationally branded drugstores remain favored, with deal flow limited only by a lack of recent construction. Cap rates for these assets typically start at 7 percent for newer buildings with the long lease terms. Small investors have stayed active in deals listing for $3 million or less, targeting ground leases on bank branches, which often trade at cap rates in the mid-6 percent range. Multi-tenant deal volume also picked up recently, with healthy institutional and large investor interest in well-occupied properties with strong anchors.

Click for larger chart
broward_m&m_q2_2011

Miami-Dade County

With construction financing still limited and the local economy improving, the Miami-Dade County retail sector will record minimal completions this year and a decrease in store closures. Combined with a modest rate of expansion by retailers, these trends will support a solid decline in vacancy and a slight rent increase. Ongoing efforts to retain and attract tenants, though, continue to require liberal use of concessions, and leasing incentives will ease only gradually in the near term as tenants drive favorable lease terms. Concessions remain elevated even in prime areas such as Coral Gables, and rents here and in other submarkets will not rise appreciably until retailers expand more rapidly and lease additional space.

…

The investment market continues to make steady progress as highly rated single-tenant, net-leased properties attract interest from investors. National drugstore chains remain a primary target, with cap rates generally starting around 7 percent. Bank branches also garner attention, and the entrance of new banks seeking to backfill vacant outparcels may present opportunities for investors in the months ahead. In the multi-tenant segment, distressed or high-quality, institutional-grade assets continue to sell, with sales of properties comprising the middle of the quality spectrum coming back modestly.

Click for larger chart
miami_m&m_q2_2011

Orlando Metro Area

Despite the most significant job growth in any 12-month stretch in four years, retail operations have only slightly recovered thus far, lacking an appreciable rise in tenant demand. Store closures totaled about 2.7 million square feet over the past year, down from 4.7 million square feet in the preceding 12 months, but substantial numbers of new tenants have not yet emerged. Retailers such as the Aldi grocery chain have opened new stores and continue to scout locations, but many others remain cautious regarding expansion, a stance that will limit near-term vacancy improvement. As a result, extremely low completions, not a robust recovery in demand, will contribute most to the projected decline in Orlando vacancy this year.

…

Multi-tenant property investment has recovered, with more deals executed over the past 12 months than in any year-long period since the recession started. Access to financing, however, remains an impediment to restoring greater liquidity in the market. Lenders will finance acquisitions of newer, well-located shopping centers, where strong investor demand persists and properties anchored by top grocery chains can command cap rates in the mid-7 percent range. Other assets in lower-visibility locations or with weaker anchors and in-line tenants typically demand higher equity commitments from the limited number of lenders willing to underwrite deals.

Click for larger chart
orlando_m&m_q2_2011

Palm Beach County

Positive economic trends, including job growth and a jump in spending, have sparked a recovery in Palm Beach County retail property operations and will drive more vigorous performance in the second half of 2011. A revival in hiring over the past 12 months triggered a 6 percent increase in retail sales as residents bought items for new jobs and moved forward with purchases deferred during the recession. As more residents become employed through 2011, further improvements in retail sales and a rise in traffic to local stores will occur. Employment and spending gains, in turn, have encouraged leasing activity of retail space, contributing to positive net absorption during the first quarter and over the last 12 months.

…

Improving access to financing continues to create a stronger, more liquid investment climate, but investors remain discriminatory. Single-tenant properties net leased to top-rated tenants account for most of the activity in the county, signaling strong demand for low-risk assets providing steady returns.

…

Additional multi-tenant sales were recorded in the past few months, and sales of well-occupied assets in high-traffic locations will help establish price benchmarks. Cap rates for such properties are estimated to range from 7.5 percent to 8.0 percent.

Click for larger chart
palm_beach_m&m_q2_2011

Tampa Metro Area

A decline in the vacancy rate to less than 10 percent in the first quarter likely signals the start of a gradual recovery in the Tampa retail property sector. … While the marketwide vacancy rate will likely remain well above pre-recession levels for several more quarters, the recent decline has been sufficient to ease the fall in effective rents. Still, effective rents average 15 percent below rates prior to the downturn, leaving a considerable deficit to overcome as tenant demand ticks up slowly.

Investment activity in Tampa continues to rebound from recessionary lows, as expanded financing capacity and investors seeking to deploy capital have supported a surge in deals. Single-tenant, net-leased product accounts for the largest share of sales, with drugstores drawing keen interest. Scaled-down construction of new stores by CVS and Walgreens has compressed drugstore cap rates into the low-7 percent range.

…
In the multi-tenant segment, Publix-anchored properties are the primary target of institutions and large investors; cap rates for strong locations start in the low- to mid-6 percent range.

Click for larger chart
tampa_m&m_q2_2011

No Comments Related Topics: Commentary, Investment, Management & Leasing, News, Research, Retail Real Estate, Trends |

Shopping Center REITs Remain Steady in Second Quarter

by Elaine Misonzhnik August 11th, 2011

Like their counterparts in the mall sector, shopping center REITs delivered a respectable performance in the second quarter of the year.

Out of 18 shopping center REITs, six beat consensus analyst estimates for FFO per share and three were in line with expectations. The outperformers included Kite Realty Group, Weingarten Realty, Equity One Inc., National Retail Properties and Federal Realty Investment Trust. Inland Real Estate Corp., Cousins Properties and Ramco-Gershenson Properties Trust performed as expected.

On the other hand, nine shopping center REITs missed estimates on FFO per share, mostly by a few pennies. These included Cedar Shopping Centers, Urstadt Biddle Properties, Saul Centers, Acadia Realty Trust, Amercian Assets Trust, Regency Centers Corp., Kimco Realty Corp., and Whitestone REIT.

Developers Diversified Realty, however, missed by $0.13 per share, partly as a result of charges related to the REIT’s efforts to sell off non-core assets.

On the whole, however, occupancies in most cases were well north of 90 percent and same-store NOIs continued to grow. According to today’s note from RBC Capital Markets’ analyst Rich Moore:

Operating metrics were generally positive across the retail real estate sector with no signs of an economic slowdown. Leasing velocity remains near record pace, move-outs are nearing their lows, bankruptcies are almost non-existent, bad debt is at an unusually low level, rent terms are normalizing, and, perhaps most importantly, tenant demand for space at the best centers has not abated.

Likewise, David Henry, president and CEO of Kimco Realty Corp., one of the country’s largest shopping center REITs, said he was pleased with the company’s performance in the second quarter of the year and with the general trends evident in the marketplace when discussing results with analysts on July 27.

Overall, we are confident and optimistic about the balance of the year and our full year operating results, he said.

shopping_center_reits_q1_2011_2

No Comments Related Topics: Investment, News, REITs, Research, Retail Real Estate, Trends |