Trends 

The regional Philadelphia retail sector remained strong in 2007, despite an increasing atmosphere of uncertainty due to a decline in consumer spending, affected by declining home values, tighter credit and higher energy costs.

The slump in the housing market has put pressure on home furnishings and home improvement stores. Other retailers have been negatively impacted by non-housing factors such as competition from mass-merchandisers (Bombay Company) and changes in technology and consumer habits (Blockbuster). Generally, most sectors have remained healthy, and despite forecasts of weaker sales, retailers are continuing expansion plans for 2008.

Development 

New construction was robust in 2007 with the opening of major shopping destinations such as the 430,000 square foot Philadelphia Premium Outlet Center in Limerick, Montgomery County and 300,000 square feet of lifestyle center space at the mixed-use Valley Square complex in Warrington, Bucks County. Some landmark area malls have major renovations planned and underway such the Cherry Hill, Plymouth Meeting and Christiana Malls and the Mall at Voorhees Town Center (former Echelon Mall).

The retail market in downtown Philadelphia continues to expand with the delivery of new space in the Comcast Tower and residential developments such as the Symphony House. Additional retail components are planned at 10 Rittenhouse Square, Walnut Towers East, 1601 Vine Street and 18th and Arch Streets. New retailers moving into the city included Sephora and Roche-Bobois USA.

Regional cities such as Wilmington and Bethlehem also have major redevelopment projects planned that will include new retail opportunities as part of larger mixed-use residential and entertainment projects.

Even with multiple new shopping centers, the Philadelphia market is not considered to be overbuilt. Most new development is occurring in underserved areas or to expand and reposition centers in established high-demand communities.

Investment 

There were numerous changes in shopping center ownership in 2007 with several multi-center portfolio sales to newly formed joint ventures between REITs and institutional investors. TIAA-CREF and Developers Diversified formed a joint venture to purchase 67 community centers including The Overlook at King of Prussia (187,000 sf) and Crossroads Commons in Burlington County. (90,000 sf). Simon Properties and Farallon Capital Partners purchased a 37-center portfolio from the Mills Corporation including Franklin Mills in Philadelphia (1.6 msf). Developers Diversified sold a portfolio of three newly developed properties totaling approximately 1.5 million square feet into a joint venture with Dividend Capital Total Realty Trust including the 305,000 square foot Centerton Square in Burlington County. Centro Properties Group, Australia's largest manager of retail property investment syndicates, acquired New Plan Excel Realty Trust, based in New York, in a transaction valued at approximately $6.2 billion.

The volume of investor transactions slowed during the second half, but there were some notable deals. Macquarie CountryWide Trust divested a seven-property Mid-Atlantic portfolio to a joint venture between Spectrum Properties and Angelo Gordon. Towamencin Village (123,000 sf) in Montgomery County and Newark Shopping Center in New Castle County (184,000 sf) were part of this portfolio. The majority of sales during the third and fourth quarters were one-off transactions. There were two user sales as Wal-mart purchased the former Home Depot in King of Prussia (99,080 sf) and Waterloo Gardens took over a 60,000 square foot Pathmark store in Warminster.

A major concern at the end of 2007 was the strict lending environment incited by the virtual shutdown of certain credit facilities. This has had a major impact on companies trying to refinance debt, most notably Centro Watt, the fifth-largest mall/shopping center owner in the United States.

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