When all is said and done after the holidays, filing for Chapter 11 bankruptcy protection may be the only option for many chains, Cohen predicts. "I certainly see more bankruptcies down the road," he says. "And we will also see vacancies going up at shopping centers and malls across the country. With a limited number of conventional retail, restaurant or entertainment tenants actively looking for space, landlords will be exploring alternative uses like dental or emergency clinics or, in the case of large big-box spaces, flea markets."

These cutbacks are also going to have an impact on retail developers. For now, most of the 6.9 million square feet of space under way statewide is devoted to projects that were started prior to the downturn, including the 2.6-million-square-foot perpetually stalled Xanadu complex in East Rutherford, Marcus & Millichap Real Estate Investment Services reports.

"We would not be able to get one of our lifestyle center projects off the ground today," says Ray Brunt, a partner at Stanbery, Development, who heads up the New Jersey office in Manasquan. "Not to sound overly negative, but the reality of the situation is that it's difficult to borrow money and to find tenants who can kick off a project," he adds.

It is no secret that financing is challenging. However, NorthMarq Capital's senior vice president and managing director, Mark Scott, has seen an improvement from 60 to 90 days ago, when it was close to impossible to borrow money. For the most part, retail financing depends on the size of the transaction. "If the loan request is below $20 million, it could be handled by a regional bank," he says. "Personal recourse would likely be required and would serve to cover up any imperfections in the center such as lease maturities during the loan term, vacancies or a weak anchor."

More recently, life companies have started to entertain non-recourse financing on retail properties. According to Scott, these deals must be squeaky clean and have all of the following components: a 90% leased/occupied rate; a grocery anchor with a BBB rating or better and a lease term that extends several years beyond the loan term; as well as grocer sales stats available for review by lender. "If any of the previous components are missing, this will serve as a death knell to the financing on a non-recourse basis with a life company," he adds.

But while some lenders have returned to the market and are lending on retail assets with creditworthy supermarket tenants at much lower LTVs, the credit markets remain locked up, according to Scott Loventhal, director of development at Garden Commercial Properties in Short Hills. "There appears to be no mechanism to compel banks to return to the business of lending on retail assets," he continues. "Lenders who are lending will require additional equity in the assets based on today's valuation, which will only continue what appears to be a vicious cycle of debt coming due on retail assets. Borrowers then have few places to turn to refinance those assets, even if they are well performing."

Despite some stock-market gains and a few positive economic indicators, Cohen believes the recovery will be a hard, long slog and is anything but right around the corner. "Most of the profit increases you are seeing at publicly held companies are not being driven by traditional revenue improvements," he says. "These gains are related to cost-cutting, and you just can't cut costs forever to improve profits."

It is telling that Wal-Mart is expanding faster in Europe today than in the US, he adds. "These are the times Wal-Mart says it lives for," Cohen says. "But apparently Wal-Mart sees more opportunity overseas than in its own backyard."

However, Cohen has seen his share of recessions. It is all too easy to lose sight of the cyclical nature of retailing--just as irrational exuberance can make a boom seem everlasting, so too can fear and cynicism make a nasty recession seem like a new reality that will never change. "Outlet retail will always be here and shopping centers will, too," he says. "There may be some long memories that affect consumer spending habits on luxury brands, but the economy eventually will recover and people will go back to their old ways."

Banks would do well to remember this: slash-and-burn approaches that emphasize foreclosure over preserving and stabilizing assets make little sense, in part because it is the lenders themselves who end up footing the bill for property taxes, insurance, security and more. "The bankers who are financing distressed real estate ought to have a little more patience and common sense and give people some more leeway with their debt structures," Cohen says. "Over time, this situation will work itself out."