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Biz Uptick Expected

Mar 1, 2009

The second half of 2009 will see a retail pick up, according to a forecast by the International Council of Shopping Centers (ICSC), making this a transitional year. Total retail sales and food services will decline 5.3 percent in the first half of this year, but rise 2.7 percent in the second half, forecasts the report. It also sees an increase of 1.1 percent in the first half by retailers that are likely to be located in shopping centers. Those same retailers are expected to experience a rise of 3.5 percent in the second half, making for a 2.3 percent total 2009 increase, in comparison with 2008.

"There certainly is a lot of pessimism for the potential of 2009," said Michael Niemira, ICSC chief economist and director of research, in a media conference call. "But that may be too broad based. The first half of the year is where the pessimism is rightly placed. We think 2009 is a transition year to stronger economic activity."

According to the National Retail Federation's 2009 economic forecast, the first half of the year will see a continuation of the weakness that was felt in most of 2008. "Most of the consumer behavior we saw in 2008 will continue well into this year," said NRF chief economist, Rosalind Wells. "Shoppers will be seeking value and trading down to discount and off price retailers in order to stretch their purchasing power." NRF expects first half sales to decline 2.5 percent. There will be some improvement in the third quarter, with sales decreasing 1.1 percent. In the fourth quarter, sales are expected to improve 3.6 percent, due to easy comparisons to last year, as well as a strengthening economy, NRF stated.

Because shopping center inclined sales actually rose slightly in the second half of 2008, Niemira expects sales to rise in 2009. New store openings will decline to between 105,000 to 110,000 this year, compared with 110,000 to 115,000 in 2008. The number of store closings, expected to be 150,000 in 2008 when final data are released, are projected to be about the same this year.

"Those numbers sound huge, but a little perspective is important," Niemira said. According to 2002 U.S. Census Bureau figures, the U.S. has more than 120 million stores. "A three to four percent contraction sounds very small in a broader sense." Yet, Niemira said he expects, "some," perhaps two percent, of the nation's 100,000 shopping centers to disappear. "They always do," he added.

The real problem is in the lending side, with the evaporation of the commercial mortgage backed security (CMBS) market and tight lending standards. The Federal Reserve's injection of $1 trillion, and the federal government's infusion of $350 billion, have yet to work their way through the system. "Time is the issue here," Niemira said. "Until we get a resolution of the financial crisis, we're locked up." As a result, Niemira expects that few development projects will be built or even proposed this year or even next. "The most important thing is for retailers to feel business is coming back and begin to expand their footprint," Niemira concluded.

Topic: Wholesale News

Related Articles: marketing 

Article ID: 932

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