JONES LANG LASALLE - OFFICE AND RETAIL HIGHLIGHTS

JONES LANG LASALLE

R E T A I L

H I G H L I G H T S

National Retail

Greg Maloney +1 404 995 6315

The turmoil in the credit markets continues to limit real estate activity with only $2.2 billion of significant retail property transactions occurring in October. This represents a 50 percent drop from 2006. (Real Capital Analytics)
Through September, retail sales have totaled a healthy $56.2 billion due to several major portfolio sales and privatizations that occurred earlier this year.
Additionally, sales of strip centers and other retail properties have all shown a 60 percent increase compared to the same period in 2006.
Retail building sales of 15,000 s.f. or larger rose during the second quarter 2007 in terms of dollar value compared to the first quarter. There were 623 retail transactions closed, with a total volume of $6.55 billion, in the second quarter compared to 582 transactions totaling $5.7 billion. (CoStar Retail Report)
Sellers are anxious to sell their assets but only a few are pressured. Compared to last year, new listings are up 33 percent since August despite 50 percent decline in sales.
Cap rates have been higher in 2007, averaging 7.25 percent compared to the same period in 2006 when they averaged 7.24 percent.

Major retail transactions in the pipeline and/or completed include:

Chattanooga, Tennessee-based CBL & Associates recently bought four enclosed malls from The Westfield Group in the Missouri cities of Chesterfield, Des Peres, Mehlville and St. Peters for $1.03 billion.
CB Richard Ellis Group Inc. has acquired Blackrock Retail Property Advisors for an undisclosed price. The Miami-based retail investment sales and debt/equity finance specialist is presently handling the disposition of 21 retail properties valued at more than $400 million.
Hendon Properties of Atlanta has bought an 11-property shopping center portfolio from Augusta, Georgia-based Hull Storey Retail Group. The $214 million portfolio totals 3.8 million s.f. and contains enclosed centers in Alabama, Georgia, North Carolina, South Carolina and Tennessee.

Buyer Trends:

Offshore investors acquired $14 billion of U.S. retail properties, which represents 40 percent of their overall real estate acquisitions, in the first ten months of 2007 compared to the $7.1 billion that was recorded in all of 2006. Portfolios involving anchored strip centers account for 80 percent of these acquisitions. Although the number of European investors continue to grow, two thirds of the retail activity on a dollar basis was accounted for by Australians. (Real Capital Analytics)
REITs have continued to benefit due to the lower leverage requirements. Since the onset of the credit crunch, REITs have acquired 25 percent of all retail properties sold. This number represents a 5 percent increase from the earlier months of 2007.

Rental rates decreased from the second quarter to $17.47/s.f. This represents a 4.9 percent increase from four quarters ago.
The vacancy rate dropped from 6.6 percent in the second quarter to 6.5 percent in the third, despite an overall increase in the past four quarters.
559 retail centers totaling 24 million s.f. were delivered to the market in the third quarter 2007, with 221 million s.f. still under construction at the end of the quarter.
Over the past four quarters, a total of 117.5 million s.f. of retail space has been built in the U.S. Total retail inventory in the U.S. market area amounted to 7 billion s.f. at the end of the third quarter 2007.

Combined retail sales for this year’s Black Friday and Black Saturday rose 7.2 percent over the comparable period last year. There were $10.3 billion in total sales on the first day and $6.1 billion on the second. Black Friday was up 8.3 percent year-on-year, while Black Saturday increased by 5.4 percent. The two days kicked off the holiday season with a strong start.
Discount stores proved to be most successful in attracting Black Friday shoppers, as America’s Research Group reported 64.7 percent of their respondents visited one of these retailers. Department stores were second with 48 percent, followed by specialty retailers drawing 25.2 percent of shoppers.
A slow holiday shopping season resulted in many US retailers offering deep discounts in an effort to attract shoppers. Last minute holiday shopping was expected since December 25th fell on a Tuesday.
Internet research company comScore Inc. recently reported that total online spending from Nov. 1 through Dec. 7 has reached $18 billion. This is an 18 percent increase from the same period one year ago.
Stores continue to struggle with the slumping housing market, credit crunch and higher food and gas prices. Consumers have become prudent in their spending causing many retailers to take a hit. However, many remain optimistic with a strong U.S. job market and increasing payrolls.