The News: Holiday Fallout, Public Confidence, Debt Loom

Now that 2008 is mercifully behind the retail sector, the question of what should be on the radar for 2009 is front and center. Conversations with industry veterans and research suggest that consumer spending, the economic policies of the new president and Congress, and fallout from the holiday shopping season will shape the retail sector for at least the early part of the year.By early February is detailed data about how retailers fared between Thanksgiving and Jan. 1, will emerge. By some predictions, holiday sales will determine whether some retailers did well enough to avoid bankruptcy or liquidation. On Dec. 30, the International Council of Shopping Centers estimated that holiday season results will show a decrease of at least 1 percent compared to the same period in 2007.Some experts believe that a strong finish to the holiday season would limit the number of retailers that fall by the wayside. “We’re very hopeful that it’s not going to be as bad as people are predicting,” said Jones Lang LaSalle Inc. CEO of retail Greg Maloney. He suggested that many savvy retailers have succeeded in moving merchandise on hand and are stocking up conservatively for the first part of the year.Retailers’ performance in 2009 will also depend on the public’s enthusiasm about shopping, and continued consumer caution appears to be a lock. Last week, the The Conference Board Inc.’s widely circulated Consumer Confidence Index plunged to a record low of 38 percent, a six-point drop from the previous month. Most of that decline stemmed from an almost 13-point dip in consumer attitudes toward the economic situation; consumer impressions of future economic conditions slipped at the smaller rate of 2.4 percent to 43.8 percent for the month. “Both subindexes bear careful watching over the next several months to see if they are starting to show signs of approaching a bottom,” said Conference Board director of research Lynn Franco in a statement.Industry players should also track how well retail property owners can tap into the debt markets. Maloney pointed out that the issue is critical both for owners that need to refinance debt and for investors that need financing in order to take advantage of investment bargains. General Growth Properties Inc. is the highest-profile retail investor facing financing challenges; last month the company got a breather when a lenders’ syndicate agreed to forbearance until Feb. 12 on mortgage loans valued at $900 million.A significant number of retail owners are in the same boat as General Growth. According to Real Capital Analytics Inc.’s latest estimates, retail properties valued at $4.7 billion are distressed, meaning that mortgages are in default, their owners are bankrupt or the property has already been disclosed. Real Capital Analytics classifies another $23.5 billion worth of retail properties as potentially troubled. The combined $28.2 billion worth of distressed or potentially troubled properties ranks second to the office sector among commercial property sectors.