What Will 2011 Bring?
For what seems like an interminable stretch of time, we’ve been waiting for things to get better.
The industry peaked in early 2007, but the floor didn’t drop out entirely until a year later—after the Lehman Brothers bankruptcy made it feel like the whole world was free falling. The stretch from late 2008 into 2009 was a dark period, marked by rapidly eroding fundamentals, mass store closures, retailer liquidations and retail real estate firms on the brink.
But things have been improving for a while. Since the second half of 2009 the industry has plodded along. Conditions did not get a whole lot worse in most areas, but they showed no real signs of improvement either.
Now, suddenly, it feels like the recovery is here. The numbers are bearing that out.
In the span of several weeks key industry metrics turned positive. Reis’ vacancy statistics for regional malls and community and shopping centers stopped rising for the first time in nearly four years. And rents on both property types stabilized.
In addition, numbers from Real Capital Analytics’ show that investment sales volumes on retail properties jumped in the third quarter and offers were up for the fourth quarter. The bid/ask gap between buyers and sellers has narrowed. Banks are increasingly dealing with dud loans and bad assets. Lenders are loosening up a bit. As a result, deal activity could double next year, bringing us back to a level of activity on par with 2004—before things got out of hand.
Cautious voices are warning that with cap rates now on the decline there is a danger of the industry overdoing things, especially as deal volume rises. We will just have to hope that most investors have learned the lessons of recent years and will not allow themselves to get to the point they were in 2007 again.
Our look at 2011 includes three features.
The first piece is a long interview I conducted with Milton Cooper, founder and executive chairman of Kimco Realty Corp. Cooper talks about his career and how he built Kimco into the giant it is today and also discusses what he sees coming down the pike in 2011.
A second piece is an analysis of the investment climate for retail assets. Experts chime in on how they see the capital markets shaping up next year and what that means for deal volume.
Lastly, a roundtable with four experts further explores the trends ahead for investment and finance.
We hope you enjoy the pieces.
David Bodamer
Editor-in-Chief
Retail Traffic
After Three Years on the Brink, Retail Real Estate is Set to Recover in 2011
