The 4/27/11 WSJ Property Report spent a half page of their section on a rehash of some obvious and questionable news about the strip shopping center industry. The Report focused on several new “surveys” by some large national brokerage firms (Colliers & Reis). The GLG reader should be alerted to the fact that the surveys could have been interpreted as either an optimistic or pessimistic report on the condition of the strip shopping center industry and WSJ chose to present a distorted optimistic version.
The important point I want to make for the GLG reader is that this WSJ article is one that can be ignored by the busy analyst who attempts to stay current on the strip shopping center industry. It is disappointing to see WSJ sounding like an industry trade journal reporting on the cheerleading section and talking about all the great plays by the losing football team.
To be fair, the article does present a few useful results of this very limited survey. To save you the trouble of reading through this jumbled and often contradictory report, I will present them as follows:
1) Colliers surveyed a sample (random?) of 233 of the 1,259 stores closed by the four largest retail failures in 2008 & 2009 (Circuit City, Linens ‘n Things, Mervyn’s & Gottschalks) and found that 51% of them remained vacant in April of 2011.
2) Colliers also found that the 49% that had been rented were rented for a rate that was 17.9% less than that paid by the former tenant.
3) Reis reported their survey revealed that rents have declined (they did not explain whether these were “asking” or “actual” rents) in the past 11 quarters from $26.53 in 2Q of 2008 to $24.84 in 1Q 2011.
4) The credit rating company, Fitch Inc. reported that 6.9% of securitized mortgages tied to retail properties (approx. $8.3 billion) are delinquent by more than 60 days which is up from 5.5% one year ago.
5) An analyst with Key-Banc Capital Markets commented for the article that Hhgregg opened 22 stores in the former Circuit City locations at rents that approximated low mid-teens as contrasted to the low twenties that Circuit City had paid.
5) CEO of Developers Diversified Realty Corp. revealed that his company has re-leased 90% of the 2.8 million square feet of vacant space it owned as the result of the closing of the ”big 4 failures” mentioned in the Colliers survey. He went on to say that most of the space was leased at rates 30% below the rents paid by the former tenants.
So what does all this noteworthy data mean to the average GLG reader? Well, I submit it could mean nothing!
These types of surveys and responses to reporter’s questions are notoriously poorly documented. Rents tell only a portion of the story. Tenant Allowances and demising costs often influence the bottom line of an owner far more than a 25% reduction in rent would indicate. Read them with a grain of salt!
Similar Posts:
- The Best Get Better While the Bad Get Worse
- Apartments to Get a Double Dose of Demand: Jobs and Demographics
- Colliers: Outside Factors Force Manhattan Office Pause
- American Dream Meadowlands Will Be A Nightmare
- Chesapeake Lodging to Buy 613-Room Denver Marriott for $119M
