Done Deals: Feeling Stable: Retail Sector Starts to Find Its Bearings in 2012

Tuesday, January 29, 2013

Feeling Stable: Retail Sector Starts to Find Its Bearings in 2012

Michael Bull in Recording Studio

ATLANTA, GA (Jan. 29, 2013) – After enduring a brutal stretch during the Great Recession and its aftermath, the U.S. retail real estate sector stabilized in 2012.

That was the consensus of a panel of experts on the most recent episode of the weekly “Commercial Real Estate Show” radio program, hosted by Michael Bull of Bull Realty. The episode took an enlightening look at the sector, examining investment sales, development trends and retailers that are expanding.

Dan Fasulo

“We definitely moved into a period of stabilization [last year],” said Dan Fasulo, managing director of Real Capital Analytics. “We’re not seeing huge declines in occupancy anymore, not really seeing rents plummeting. There might be certain submarkets that are still pressured, but all in all, fundamentals have stabilized.”

The sector should continue to improve gradually in the year ahead, Fasulo added. “I think we’ll see incremental growth,” he said. “The U.S. economy is like a big ship – once it’s going in the right direction, it’s hard to turn back around.”

Bob Simons

All of the components of the retail real estate sector are feeling better about the industry, said Bob Simons, a partner with the Hartman Simons commercial real estate law firm.

“There’s an increased confidence,” he said. “There’s confidence from the consumers – [they] are starting to spend more money out there. There’s increased confidence from the equity markets. Going back to ’09, 2010, the equity markets were running as fast as they could from the retail sector.

John Crossman

“They’re starting to come back, and valuations are starting to stabilize, improve, which brings lenders back to the fold.”

Despite the overall uptick, the sector still faces issues, and filling vacancies can remain a challenge. John Crossman, CEO of Crossman & Co., said his firm often has to get creative to fill the retail properties it leases.

“We’re being very pro-active on non-traditional uses … ,” he said. “Maybe there’s an office tenant that comes into a retail space. We’re [finding] medical [tenants], which can be very helpful, and we’ve had churches come into shopping centers.”

Jeff Fuqua

The guests said the sector is nearing the point where new development is feasible, but Jeff Fuqua of Fuqua Development said new retail properties will be a good deal smaller than the suburban power centers of the past, will incorporate other uses such as residential, and will be located in intown or dense suburban environments. Contemporary retail developments are“smaller, more complicated, more expensive – [they’re] different,” he added.

According to the guests, sporting-good chains and specialty grocers are adding sites aggressively, while home-improvement retailers have been stagnant when it comes to expansion.