Retailers Anticipating Growth?

There's some indication, including the strong retail numbers in March, that the retail industry is emerging from its coma.

April 12, 2010
By Dees Stribling, Contributing Editor

There’s some indication, including the strong retail numbers in March, that the retail industry is emerging from its coma. Some of the stronger retailers seem to be on the prowl for locations that represent growth opportunities, for one thing. Retail sales might not spike upward in the next few months as much as in March, but some retailers are betting that the longer-term trend will be strong enough to support growth.

In Jonesboro, Ark., for instance, Ashley Furniture Homestore inked a deal recently to lease 25,000 square feet at Bernard Court, a 108,500-square-foot shopping center owned by New York-based Stonemar Properties. Previously the center had lost a Goody’s location. An existing tenant, Hobby Lobby, then expanded into 10,000 square feet of former Goody’s space, and the new lease means that Ashley Furniture is taking the balance of the vacancy.

How are retail space owners competing for these on-the-prowl retailers? “You have to have a good product to match a retailer that believes in its business and is looking for opportunity that fits into its business plan,” Jonathan Gould, CEO of Stonemar Properties, told CPE. “We in turn wanted the space filled with a tenant that will keep it active and lively.

“Some major tenants have been requesting huge tenant allowances in cash, fishing for as much as they can get,” Gould continued. “That seems to be easing off a little now. But Ashley didn’t approach things that way. They negotiated for what they wanted but didn’t ask for the moon.”

Bubble in the East?

What’s that sound coming from East Asia? According to Nomura Asset Management Hong Kong Ltd., the inflating of a property bubble in China. Bloomberg reported on Sunday that hedge-fund manager James Chanos said that China is ‘on a treadmill to hell’ and that the bubble might pop later this year.

A survey by Bloomberg is predicting that housing prices will increase 11.4 percent in March. Separately, Standard Chartered reported last week that land prices in 10 major China metros ballooned an average of 147 percent in 2009. That prima facie sounds like bubble territory even to non-experts in the China real estate market.

On the other hand, the Great Bubble of China has been predicted for some time now, and hasn’t actually popped so far. China’s still a developing nation with a vast amount of economic growth still to come, after all. Richard Gao, lead manager of the Matthews China Fund, told MarketWatch recently that he thinks that the government is dealing with real estate inflation, though he did characterize some property markets as “overheated.”

The Upward Interest Rate Creep

The chattering classes were wondering this weekend just how strong the recovery of the U.S. economy is. Some said stronger than most people think, while others said not so fast, it isn’t recovering that quickly. A consensus, as usual, will have to wait until it’s already obvious what has happened.

Interest rates do seem to be creeping upward, however–a harbinger of growth and possibly a drag on that growth as well (which isn’t always bad: the housing industry could have used a drag on growth back around, say, 2005). At the end of last week, the average 30-year fixed-rate mortgage interest rate climbed to 5.21 percent, the highest it has been since last summer, according to the Federal Reserve. A number of economists are predicting that the rate might hit 6 percent by the end of this year.

Wall Street had a reasonably good day on Friday, with the Dow Jones Industrial Average gaining 70.28 points, or 0.64 percent. The S&P 500 and Nasdaq advanced 0.67 percent and 0.71 percent, respectively.