Expect retail real estate to be "significantly afflicted" well into 2009 due to recessionary conditions and the most significant sea change the U.S. retail market has experienced since the early 1980s, according to Boston-based Colliers International Property Consultants Inc.
With the economy expected to contract until at least the second quarter of 2009, record-low consumer confidence and more job losses expected into the new year, Colliers' biannual Retail Real Estate report noted that retailers have become increasingly concerned about domestic consumer spending, with very few of them seeing new sources of growth.
In addition, the emergence of a global recession, combined with a stronger U.S. dollar and a noticeable decline in wealth, has dealt a fairly substantial blow to tourism-related retailers-especially high-end retailers, explained Ross Moore, executive vice president and director of market and economic research at Colliers International.
Meanwhile, added Moore, lower gas prices have cushioned some of these effects, but the trend is still down with lower retail sales growth in almost every category.
"Not surprisingly, retail real estate vacancies are up and asking rents are down, albeit just marginally," said Moore. "Demand for retail space is running at a paltry one-quarter of last year's pace, and new construction is down 50 percent from 2007 levels. …