Group Predicts Retail Development Recovery in 2011

New York, NY, March 27, 2009--A real estate brokerage firm is predicting headwinds for retail development.

Harvey Green, president and CEO and Hessam Nadji, managing director of research, both of Marcus & Millichap, said in the company's recently released 2009 National Retail Report that the retail industry will continue to face "headwinds" in the coming year including job losses, declining retail sales, rising vacancy and falling rents."

Retail construction is expected to drop by more than 30% this year, the Marcus & Millichap report stated. However, the decline will not prevent substantial increases in vacancy expected from continued store closures and reduced retailer expansion.

Specifically, the firm predicts the retail vacancy rate to increase to 10.2% in 2009. With retailers increasingly asking for, and obtaining, rent concessions from landlords, the firm forecasts that asking rents will fall 4.5% and effective rents will drop 5% during 2009, with "many oversupplied markets [recording] steeper declines."

To partially offset these stresses, Marcus & Millichap recommends that retail property owners "closely monitor expenses to help preserve NOI and uncover money-saving operational measures that can increase efficiencies."

Despite all the economic headwinds and dramatic slowdown in sales for many types of retailers, Green and Nadji stressed that "investors should not presume the overall condition of the retail market to be distressed," adding that buyers can still find retail properties that will be "well-positioned for an eventual rebound."

Looking beyond 2009, Marcus & Millichap said, "reduced development will help stabilize the market in 2010 before a moderate recovery starts in 2011." Green and Nadji said that in 2011, "a new cycle will start as new concepts emerge and the survivors begin to expand once again."