| CityBizList: Retailers’ Report Cards Good Barometer for Commercial Real EstateSays Trout Daniel Principal |
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By William P. Ferrell
The commercial real estate industry will be watching closely as retailers get their report cards in the next few days. The report cards will come in the form of sales reports from September, the end of the much anticipated 2009 “Back to School” shopping season.
Next to the Holiday Shopping Season, the period from late July until the end of September represents the most critical period for many retailers in the calendar year. While September’s sales results will be scrutinized by the retailers, their corporate leadership and Wall Street watchers, the commercial real estate industry will look to these numbers as a key barometer showing where the commercial real estate market is headed.
Many retailers pull in a large percentage of their annual revenue during the back to school season. Strong performance during this time period may indicate a good holiday shopping season ahead and may encourage retailers to open new stores in 2010. This type of news will buoy the hopes of the commercial real estate industry for an increase in demand for retail space. Conversely, weak numbers in early fall can lead to retailers scrapping expansion efforts and looking to shutter underperforming stores, leading to more vacant commercial space.
Early reports on back to school shopping season are not outstanding, but there are some bright spots. Overall, same store sales for most retailers were stronger in August than they were in July, however, the retail industry overall suffered a 2.9 percent sales decline in August 2009 when compared to August 2008.
There is still a chance retailers may have rallied in September. The late Labor Day weekend pushed back some consumer’s shopping trips a week. In recent years, retailers have also seen a growing trend of back to school purchases being made later in September, after school is back in session, the weather gets cooler and parents have a better idea of what they need to buy.
High end stores that cater to the teenage crowd have suffered the most in terms of sales data this year. Value-oriented retailers like TJ Maxx and Marshalls turned in strong August numbers and are continuing to perform well in spite of the recession.
Nearly all value-oriented retailers are still making deals, not only for their customers, but deals for themselves in terms of securing retail space or renewing leases at favorable terms. There is still a vibrancy in this segment of the commercial real estate market that will be bolstered even more by strong sales data this fall.
September 30 marked the end of a challenging 12 month period for the retail sector and the commercial real estate industry in general. The coming months will be a true litmus test, showing us where the economy and the commercial real estate market stand as we compare each months’ sales data with the corresponding month from the previous year. Matching numbers against the lower sales numbers of the previous 12 months will give retailers a fighting chance to show some positive sales figures and incite some optimism.
Savvy retailers who are meeting consumer demand and operating wisely will continue to be in a position to capitalize on opportunities in the commercial real estate market. Others will need to step up their game to survive until consumer confidence and spending rebound, pushing sales figures back into positive territory.
Will Ferrell is a Principal with Trout Daniel & Associates and can be reached at wferrell@troutdaniel.com or 410-435-4004.
This article originally appeared in the CityBizList on October 2, 2009. |
