(Carl Cronan is editor of Real Estate Florida.)
TAMPA, FL-As the recession continues into much of this year, consumers will be even more focused on discounts and essentials, putting discount and warehouse stores in a better position than luxury and upscale apparel chains. That's the message that was conveyed to more than 700 people attending the International Council of Shopping Centers' West Florida Idea Exchange, held Tuesday at the Grand Hyatt Tampa Bay hotel.
"Clearly, people today are buying what they need, not what they want," James Maurin, chairman of Covington, LA-based Stirling Properties and a former ICSC chairman, told the luncheon audience. He cited numerous figures computed by ICSC researchers showing that discounters and, surprisingly, pharmacies fared better than most other categories during the recent holiday season.
Last month, ICSC issued a forecast that retail sales may pick up in the latter half of 2009. Total sales are expected to decline 5.3% in the first half, then rise 2.7% in the second half, balancing out to a full-year decline of 1.3%. Even though shoppers are likely to focus on necessities this year, Maurin noted that they will move only on markdowns of 30% to 50%, similar to bargain hunters on vacation.
Maurin, a three-decade veteran of retail development, compares the current recession to those in the latter stanzas of the 20th century. The biggest exception is that this time around the market is not suffering from the overbuilding of retail space that was seen in the early 1990s. The sector's annual growth rate is now 2% to 3%, an amount that can be easily absorbed in years to come, he said.
Lack of liquidity is the most troubling aspect for retail lately and could rival the 1990 credit crunch, Maurin noted. He added that the CMBS market measured only $12 billion last year, a small fraction of that in recent years.
"There is no secondary market for commercial mortgages," he said. "The ticking time bomb is not the banks; the problem is in the CMBS market," where a lack of flexibility is prevalent.
Several possible solutions to the challenges include expanding the Term Asset-Backed Securities Loan Facility, or TALF, to allow the use of commercial real estate as collateral, Maurin said. Others are encouraging foreign investment in US real estate, modifying accounting rules and encouraging banks to extend performing loans, he indicated.
Retail and housing have been the focal points of the recession in Florida, according to Hank Fishkind, a noted Orlando economist and the event's keynote speaker. He pointed out that the entire state is "over-stored" and needs to regain equilibrium, adding that Florida is still growing in population but is now being outpaced by Georgia and North Carolina.
Fishkind also told the audience he foresees an upturn in the latter months of 2010, and that another Great Depression can be avoided by federal government involvement such as economic stimulus, TARP and interest rate cuts. "The actions that have been taken so far are beginning to work," he stated.
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