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Retail Space Markets Still Buoyant in Most RegionsAlthough the global economy is anticipated to decelerate in 2008, demand for premier streetfront retail space remains in high demand in almost every region of the world. High-end fashion retailers in particular continue to stakeout high profile, high traffic locations in an attempt to better position their brands as premier fashion items. Supply continues to be limited and the rising prosperity in many developing countries is prompting many to expand into these relatively new markets. Rents, as a result, are expected to continue rising in both the shortand medium-term. Countries of note included; China, India, United Arab Emirates, Russia, and Brazil.
Retailers Brace for More Challenging Retail EnvironmentShopping center owners and retailers alike have witnessed a more sluggish retail environment for the past several years as the economy has slowed and housing weakened. Since late 2007, however, threats of recessionary-like conditions have become increasingly more evident. Consumer confidence, a key indicator for the economy in general, registered a 15-year low in the month of April (with the exception of March 2003 and the onset of the Iraq war). A combination of a slowing economy, falling house prices, a significant rise in gasoline prices, a more challenging jobmarket and a deterioration in credit conditions have all united to derail what was a fairly robust retail environment. Since the beginning of the year a number of retailers have announced plans to close stores or at a minimum to curtail further expansion.While construction is somewhat elevated it is certain to trend down by year-end. The national vacancy rate increased by 20 basis points during the first quarter to 6.5%, however, further increases are not expected to send the national rate beyond 7.0%. Despite a modest weakening of fundamentals, shopping center rents continue to increase with the latest annual increase registering 3.9%.
2008 Colliers Real Estate ReviewIn last year’s US Real Estate Review we listed a number of “crises” that might derail a near perfect period for commercial real estate. Being somewhat prescient, one such item was a debt crisis which of course is exactly what transpired beginning in August and continuing into 2008. The subprime lending debacle has been well chronicled and is a story that still is without an end. For readers of this report, the concern now is how will events transpiring in the residential world impact our universe as leases come up for renewal, development projects get a second look, mortgages are refinanced and investment decisions are made. The outlook has never been so murky but the key to navigating safely through such dangerous waters is good information, good advice and a little perspective. That is the intent of this report.
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