Copyright Mortgage Bankers Association of America Jan 2009Expect retail real estate to be "significantly afflicted" well into 2009 due to recessionary conditions and the most significant sea change the U.S. retail market has experienced since the early 1980s, according to Boston-based 
Colliers International Property Consultants Inc.
With the economy expected to contract until at least the second quarter of 2009, record-low consumer confidence and more job losses expected into the new year, Colliers' biannual Retail Real Estate report noted that retailers have become increasingly concerned about domestic consumer spending, with very few of them seeing new sources of growth.
In addition, the emergence of a global recession, combined with a stronger U.S. dollar and a noticeable decline in wealth, has dealt a fairly substantial blow to tourism-related retailers-especially high-end retailers, explained Ross Moore, executive vice president and director of market and economic research at Colliers International.
Meanwhile, added Moore, lower gas prices have cushioned some of these effects, but the trend is still down with lower retail sales growth in almost every category.
"Not surprisingly, retail real estate vacancies are up and asking rents are down, albeit just marginally," said Moore. "Demand for retail space is running at a paltry one-quarter of last year's pace, and new construction is down 50 percent from 2007 levels."
The Colliers report predicts shopping centers, malls and urban retail alike will feel the effects of this weakened demand, with rising vacancies the new reality as construction levels have already started to fall off, and this phenomenon will exacerbate in the coming quarters.
"The near term is sure to be very challenging for retailers and landlords alike," said Pat Duffy, director of Colliers Retail Services Group, Boston. "With the economy faltering, shrinking credit availability and a quickly deteriorating job market, holiday sales are sure to be the weakest many retailers can remember. Looking ahead to 2009, it's highly unlikely conditions will stage any type of recovery until the second half of the year at the earliest."
Nonetheless, said Duffy, retail landlords will be faced with rising bankruptcies and further store closures as retailers confront an increasingly precarious retail environment.
"Anecdotal evidence from our retail practitioners nationwide has made it clear that retailers are very reluctant to go forward with plans to open new stores," said Duffy. "Only single-digit percentages of originally planned openings are coming to fruition, and we predict store closings on a large scale come January, after retailers have slugged through the holiday peak season."
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