Retail has been the most vulnerable sector during the first six months of 2009.  Personal income is down, the personal savings rate is up, and consumers continue to scale back on spending, particularly for big ticket items.

According to the International Council of Shopping Centers, May 2009 chain store sales were down 4.6% from 2008.   Although apparel retailers posted decreases and department and luxury stores had double digit declines in sales, discount retailers and drugstores had gains.

The list of retailers closing all or multiple stores continues to grow as does the number of chains filing for Chapter 11.  Car dealerships will be the next segment adding to an already unstable retail climate.  There will be numerous dealerships on the market as the result of Chrysler and GM bankruptcy and the potential scale back of Ford’s dealer network.  With few other car brands to backfill, there will be limited demand for these sites. 

The regional vacancy rate increased from 7.7% to 7.9% during 2009 while asking rents decreased approximately 2%.  Landlords have been striving to retain tenants and maintain occupancy, even working out temporary lease concession for existing tenants. 

Although store closings have outpaced new demand, there are some retailers that continue to expand or relocate.  Much of the recent activity in the market has been relocations as retailers take advantage of market conditions to close under-performing stores and move to more desirable locations. 

Fast food chains, dollar stores and other discount general merchandise stores have been active.   Non-retailers such as childcare providers, medical centers (including dialysis and testing) and professional services have stepped in to occupy shopping center locations.  

The volume of investment transactions has remained extremely low.   Sales during the first two quarters of 2009 were limited to smaller strip centers and freestanding properties such as drugstores.  There are a few shopping centers that may trade during the second half, but the volume of sales will remain low.  Due to a lack of transactions, it is difficult to gauge pricing trends. 

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