Daily market intelligence on mortgages, equity raising, investment sales, and CMBS.

Thursday, 11 January 2018

Apocalypse Not: Why The Demise of Retail Centers Is Some Truth, Some Hype

Some retail tenants at malls across the country are struggling, but claims that the entire sector is failing may be premature.

By Ryan Severino, Chief Economist at JLL

One of the following two things is true: either people who work in commercial real estate are liars or they are the only people who do not go to malls.

Of course I am being a bit facetious, but at virtually every conference I attend or speak at, I inevitably hear someone say that malls are dead or, more broadly, that retail is dead. To be fair, real estate players are not alone. The term, “Retail Apocalypse” is now commonly used. Is that the truth or just hype? It’s a bit of both, but leans mostly toward hype because this declaration of Armageddon paints the sector with a very broad brush across too many dimensions. By digging into what’s behind the pessimism, we can see why some retail centers are struggling and others are thriving.

Why So Sad?

The reason for all the doom and gloom in retail real estate is e-commerce. E-commerce sales continue to grow far faster than overall sales. As of last year’s third quarter, e-commerce was growing at a roughly 16-percent rate, while overall sales were growing at a roughly 4-percent rate. Official figures show that e-commerce constitutes about 9 percent of overall retail sales. But that understates the true percentage (see story on page 4). On one hand, 9 percent is a minority of overall sales. On the other, even at just 9 percent, e-commerce has caused serious problems for some brick-and-mortar retail centers. Even if e-commerce sales growth slows from its blistering pace, it will continue to grow faster than overall sales and be increasingly disruptive to retailers.

Who Bears the Brunt?

Although e-commerce continues to grow, it’s not impacting all retailers equally. Those most at risk are the purveyors of what can be thought of as commoditized goods. These are common, general goods that consumers are broadly familiar with. The imperiled retailers of such items generally fall into two categories: those that sell other producers’ goods, and...


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Data Digest







Top Bookrunners Domestic, Private-Label CMBS - 2017
Investment Bank #Deals Vol$mln MktShr%
Goldman Sachs 17.59 11,819.34 13.68
JPMorgan Securities 14.52 10,968.11 12.70
Citigroup 12.04 10,012.71 11.59
Wells Fargo Securities 14.02 9,936.06 11.50
Deutsche Bank 12.55 9,879.74 11.44




cppichart FP



CMBS 2.0 Spreads


Top CMBS Loan Contributors - 2017
Lender #Loans Vol$mln MktShr%
Goldman Sachs 146.89 11,719.34 13.63
JPMorgan Chase Bank 117.68 10,114.14 11.76
Deutsche Bank 198.48 9,689.97 11.27
Morgan Stanley 166.18 8,539.78 9.93
Citigroup 199.05 8,088.24 9.41





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