RECon Report: Mixed Prospects for Economy, Retail
- May 20, 2008
For the next six to 12 months, expect a “touch and go” economy demanding caution and opportunity in the retail real estate sector. That was the perspective offered by Hessam Nadji, head of research for Marcus & Millichap Real Estate Investment Services, to several hundred real estate professionals at the Renaissance Las Vegas hotel yesterday afternoon. The firm presented its annual mid-year economic and retail outlook in conjunction with RECon, the International Council of Shopping Centers’ convention, which concludes tomorrow. Promising to offer a balanced view at a time when “fact-based information often gets lost,” Nadji said that total store closings are projected at 6,000 this year, up from 4,500 in 2007. But Nadji pointed out that store openings and closings are a constant fact of retail, and that even the 6,000 closings represents only 1 percent of the total inventory of U.S. stores. And new retail space is coming on line at a pace of 2 percent annually while retail sales are increasing 4 percent–an encouraging sign. The housing market will clearly remain troubled for some time, as more than 618,000 condominiums and 3.8 million single family homes remain on the market. On the positive side of the ledger, the 29 percent decline of the dollar during the past four years has boosted exports. “If not for the weak dollar, we would be having a lot worse economic numbers,” Nadji pointed out. Some markets demonstrating job growth suggest promising territory for retail growth, Nadji said. Texas corners the top spots among the fastest-growing employment markets, including Houston, Dallas-Fort Worth, Austin and San Antonio. Other fast-growing job markets include Charlotte, Seattle, Denver, San Jose, Portland, Ore., and Atlanta, Nadji added. During a panel discussion moderated by Bernard Haddigan, Marcus & Millichap’s national retail director, an impromptu audience survey revealed cautious optimism about the prospects for retail real estate. Forty seven percent of audience members described themselves as “somewhat bullish” about investment prices, and another 38 percent called themselves “moderately bearish,” agreeing that cap rates for retail properties would rise 50 to 100 basis points during the next year.