Encouraging words seem harder to find about retail than about any other property sector these days, and the analysts at RREEF Research would hardly be mistaken for Pollyannas. Nevertheless, a new forecast from the Deutsche Bank affiliate finds reasons to sound a few modestly upbeat notes.
“Good news does exist for the retail sector,” RREEF Research stated in an analysis published last week as part of a commercial real estate investment forecast, offering neighborhood and community centers as particular beneficiaries. An average of 25 million square feet of new product came on line in the category while retail was booming between 2003 and 2007. While it is substantial, that figure still represents 6.5 million square feet of space less than the neighborhood and community categories added on average each year since 1981.
Also this is less than half the 54 million square feet of new inventory that came on line during the retail boom years between 1985 and 1990. Vacancies for those centers will peak at 10.5 percent this year, but they will decline to 9.5 percent as the commercial real estate market starts recovering in 2010, RREEF Research predicted.
Leasing velocity and rental rates will take the hardest hits this year in low-barrier-to-entry locations with low land costs—in particular, locations in the Southwest and the Southeast, with the exception of South Florida. Though no markets will escape the downward trend, a few will turn in better-than-average performances: Seattle, Washington, D.C., San Francisco, Oakland, San Jose, Los Angeles, Orange County, New York City and Miami. The small number of new leases being transacted makes it tricky to estimate how much rents will fall, but RREEF suggested that the most common range for declines will be 5 to 10 percent.
The forecast turned in no surprising recovery for 2009. Although, it speculated that the decline in retail sales might come to a halt by the middle of the year, with the beginning of a modest improvement by the fourth quarter. “More solid gains will not likely occur until 2010 and a vigorous rebound will wait until 2011,” the forecast stated. “Until then, the discounters and wholesale clubs should continue to outperform the sector.”
When the turnaround finally arrives, the luxury goods market will be among the first to recover. As seen with Sunrise, Florida, where High-end Retailers expand at Sawgrass Mills.
Discretionary retailers catering to the middle and lower-middle markets for electronics, apparel and mid-level department stores will follow. Bringing up the rear will be home-products stores, which RREEF Research projected are “likely to have the flattest bounce.”
Portions by Paul Rosta
Triple Net Lease Properties (NNN) & Commercial Real Estate
There are plenty of benefits of Net Lease Investments such as using a 1031 tax deferred exchange. Unlike other investments, commercial real estate is a great tax saver and helps you defer capital gains tax by using the 1031 tax deferred exchange.
Here are some of the Retail Single Tenants that may be available as a Net Lease Investment or Triple Net Lease Property:
•AutoZone Net Leased Properties
•Burger King Net Leased Properties
•Costco Net Leased Properties
•CVS Net Lease Investments
•FedEx Net Leased Properties (Federal Express Net Leased Properties)
•Home Depot Net Leased Properties
•Kohl’s Net Leased Properties
•Kroger Net Leased Properties
•Lowe’s Net Leased Properties
•McDonald’s Net Leased Properties
•Oreilly’s Net Leased Properties
•Publix Net Leased Properties
•Safeway Net Leased Properties
•Staples Net Leased Properties
•Steak n' Shake Net Leased Properties
•Target Net Leased Properties
•Walgreens Net Leased Properties
•Wal-Mart Net Leased Properties
•Wendy's Net Leased Properties
If you are considering purchasing Commercial Real Estate or a Triple Net Leased Property, you can apply for CTL Financing, Non Recourse Loans and Commercial Loans at Loanrise.com.