Retail Retracts

While the retail sector did not fare as badly as some had feared as a result of high unemployment, fundamentals continue to founder.

By Keat Foong, Finance Editor

While the retail sector did not fare as badly as some had feared as a result of high unemployment, fundamentals continue to founder. Balancing the actions of distressed retail real estate tenants with those of expanding tenants, “net on net, we will still see relatively high vacancies for retail real estate,” predicted Victor Canalog, vice president of economics and research at Reis Inc. The retail vacancy rate, he said, still stands at 11 percent, which is a 21-year high. “The rate may decline slightly in 2012, but the only reason is that construction is really, really tight.”

The shuttering of many retail companies, said Canalog, is “absolutely contributing to the lack of demand for retail (space).”

Indeed, according to the International Council of Shopping Centers, the Deltona/Dayton, Fla., MSA, the metro with the second-largest market share (0.9 percent) of total space closed in the fourth quarter, is expected to be disproportionately affected by Sears Holdings’ closings. And most of the 975,000 square feet of retail space lost in the fourth quarter in Boston, the metro with the largest amount of space closed, is attributed to the complete liquidation of Syms and Filene’s Basement stores, according to ICSC.

For more on the impact of big-box retail closures on the net lease investment market, see “Going Dark,” which appeared in the March 2012 issue of CPE.

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