Slowing Sales, Softens Prices
December 19th, 2007 by Emmanuel Cervantes
“The chill spreads to commercial,” were the words printed in the Business section of the Los Angeles Times. The article discussed how the turmoil that plagues the credit market has slowed sales and softened prices for commercial office buildings.
“…with a falling stock market, a shrinking dollar and widespread concern about recession, real estate deals are getting dicer.” - Los Angeles Times, Roger Vincent. (Full Article)
There is a lot of talk about a coming recession and many would argue that the signs are all around us (myself included); higher gas prices, less equity in homes, tighter credit and a struggling dollar. It is evident that as consumers, we are cutting back. Here are the numbers for October sales and the trend is expected to continue.
Retail sales in October grew at a sluggish 0.2%; Furniture/furnishing stores posted a decline of 0.9%; Department stores suffered a 0.5% decline; Sporting goods, book & music stores fell 0.4%; E-commerce declined 1%; and clothing sellers gained a mere 0.1%.
December 19th, 2007 at 2:50 pm
If the Retail sales figures posted in October are not a sign of the coming recession, then perhaps December sales will convince you.
Retailers this year prepared themselves for the worse and adapted new sales strategies in order to combat the anticipated sluggish sales. You may have visited a Target, Walmart, or Kohl’s this late October or early November and noticed Christmas decorations up. That was not a mistake, that was a tactic retailers used this year to blur the line between seasons; it was a way of extending the shopping season.
In the retail world, a rule-of-thumb is to never promote Christmas merchandise and decorations prior to Thanksgiving, yet this year that rule was broken; Hallo-Thanks-Christmas. That is what we got this year. In an effort to motivate consumers to dig in their pockets and purchase items, retailers decide to start promoting Chrsitmas early this year. Retailers quickly adapted and prepared for a recession.
With slowing sales and a recession at hand, the retail and office sector of commercial real estate is not looking as promising as before. In the end, I may be biased, but I always find comfort in the multi-family sector; its the most basic human necessity: shelter.