Weekly News & Capital Markets Perspective

January 12th, 2012

This week’s perspective is provided by Mike Sullivan:

As we are now two weeks into 2012, the obligatory year-end reports are arriving seemingly on a daily basis.  While everyone can relate to shopping to one degree or another and given that the health of the retail sector is a leading indicator of the general health of our economy, the retail reports being released are of particular interest. 

I recently read in National Real Estate Investor that the 2011 holiday shopping season resulted in some relatively strong sales forU.S. retailers which should promise a stable year ahead.  The article stated “same-store sales forU.S. chains posted an increase of more than 3 percent during the November/December period, a performance comparable to 1994.”  This is obviously good news, but like the theme in several posts we have written recently, there is more to the story.  Much of the revenue during the holiday period was the result of extreme promotions or significant discounts.  So while retailers were still able to post strong sales despite unemployment over 8.5% and a stagnant housing market, much of it was event driven. 

Given our investment real estate perspective, we’re wondering what this news means for the market.  Based on a few recent retail investment transactions in our market and on a few national retail deals, including the $1.4 billion acquisition by a Blackstone/DDR joint venture of 47 properties in 20 states totaling 10.4 million square feet, we believe the trending good news in sales is providing comfort to investors.  We anticipate the interest in retail deals by investors to increase through the year as the economy continues to gradually inch its way to a full recovery.  Sellers, including special servicers, are recognizing this as well and are bringing more opportunities to market.  Retail investment sales should be on the rise – a refreshing change as compared to the last few years.

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