Investors looking for distressed retail assets will surely be able to find them in the coming months and years. One of the big questions, however, is whether job growth and consumer confidence will drive enough retail sales to generate upside potential anywhere except at the very best retail sites. In the words of Cary Calkin, Newport Beach, CA-based director of asset services for Voit Real Estate Services, "Retail has been very slow to recover." But that simple comment carries far-reaching implications both for the volume of retail distress that will be hitting the market and for the approach that potential buyers will adopt in bidding for that distress.

As Calkin explains, special servicers and lenders had some hope until recently that job growth would increase, which would improve retail prospects. As long as they maintained that hope, they were more willing to extend a retail borrower's loan or try to work it out. However, that hope prevailed "before the markets started to change over the past few months" and before some disappointing reports on job growth. Now, Calkin says, "Special servicers are saying that they need to move more of the retail to foreclosure." The increase in retail distress is already playing out in the portfolio that Voit manages, which includes non distressed properties that it owns and manages on its own behalf as well as distress (mostly in the Southwest) that it asset-manages on behalf of clients. In particular, Calkin foresees some sizable centers in the Southwest about 150,000 to 250,000 square feet-that are unlikely to work out any loan extensions or modifications with their lenders or special servicers.

Of the distress that it manages for clients, about 27% is retail, but that percentage is growing. With that increase has come a need for "more boots on the ground," Calkin says. "Of the last six people we have hired, four have been retail specialists ," he points out.