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The Retail Development Crisis: What Now?

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Powerpoint presentation by Mark G. Bulmash, President of Bulmash Real Estate Advisors, LLC - June 13, 2009

Powerpoint presentation by Mark G. Bulmash, President of Bulmash Real Estate Advisors, LLC - June 13, 2009

Published in: Real Estate, Business, Technology
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  • 1. The Retail Development Crisis: What Now? Mark G. Bulmash Bulmash Real Estate Advisors, LLC Congress For New Urbanism June 13, 2009 Denver, Colorado
  • 2. Current Situation Bulmash Real Estate Advisors, LLC
  • 3. Financial Markets – Bank Debt
    • $1.8 Trillion of Commercial Loan Debt (1)
    • $216 Billion in losses is expected by end of 2010 (1)
    • In 2008, mortgage bankers closed $116 Billion on commercial loans, down 65% from 2007 (2)
    • $218 Billion of Commercial debt is set to mature in 2009 & $270 Billion is due between 2010 & 2011 (3)
    • By year end, small banks may have 13-14% of all construction and land loans are predicted to be delinquent (1)
    • Many banks are not taking back loans where borrowers are making debt service – “extend & pretend”
    Bulmash Real Estate Advisors, LLC
  • 4. Financial Markets - CMBS
    • Market size: $806 Billion (4)
    • $90.5 Billion is maturing in 2009 (4)
    • $61.9 Billion is maturing in 2010 (4)
    • $17.15 Billion is delinquent as of April 2009 vs. $3.26 Billion in April 2008 (5)
    • Projection is $40 billion by yearend (5)
    • No new activity since second quarter of 2008 (4)
    Bulmash Real Estate Advisors, LLC
  • 5. Financial Markets – US REITs
    • Maturities for REIT debt is $93.7 Billion from now through 2012 (6)
    • $53.1 Billion is for Retail subsectors alone (6)
    • In 2009, REITs issued $14.2 Billion in new equity through May 31 (7)
    Bulmash Real Estate Advisors, LLC
  • 6. Retail Real Estate Transactions
    • First quarter 2009 Property Sales are down 75% from the same period in 2008 and down 90% from 2007 (8)
    • $8.85 Trillion is being held in cash, bank deposits and money-market funds (8)
    • Property values have declined 25-40% (8)
    • Major gap between buyers and sellers perception of value (20-40%) (8)
    Bulmash Real Estate Advisors, LLC
  • 7. Retailers
    • Dichotomy: many are doing poorly while some are doing well (9)
    • Chain Store Sales are off by 4.6 % in May (10)
    • Overall Retail Sales are expected to decline 2.5% in first half of 2009, decline 1.1% in Q3 and increase 3.6% in Q4 (11)
    • Consumers are buying necessities, not luxuries
    • Retailers are having trouble with credit
    • Many retailers have eliminated most if not all of their real estate staff
    Bulmash Real Estate Advisors, LLC
  • 8. Developers/Owners
    • Rents are expected to be down by 6% in 2009 (12)
    • CW reports that 130 million square feet has gone dark since recession started (13)
    • Demand is estimated to decline by $49.8 msf in 2009 (14)
    • Supply is expected to increase 90 msf in 2009 (15)
    • Most developers have eliminated a significant amount of their real estate staff
    • Most developers are focused on their liquidity and solvency
    • Most developers are only working on projects already under construction and pushing back opening dates
    Bulmash Real Estate Advisors, LLC
  • 9. Future Bulmash Real Estate Advisors, LLC
  • 10. Financial Markets
    • Lenders will demand more equity & use tighter standards – “Big deals” will be very difficult in short run (13) (16)
    • It will take years before lending approaches recent levels
    • Everyone will be more disciplined & creative just to get capital
    • REITs will continue to deleverage (17) (18)
    • Public subsidies will remain important
    Bulmash Real Estate Advisors, LLC
  • 11. Retailers
    • Consolidation across segments
    • Winners will be stronger than ever
    • Survivors will be opportunistic
    • Some are experimenting with smaller concepts or extending into new market segments
    • Retailers want proven existing & infill properties – customers need to be there now
    Bulmash Real Estate Advisors, LLC
  • 12. Developers/Investors
    • Focus on existing properties, not much new development
    • Some infill opportunities are available where the trade area is there and underserved
    • Buyers will spend money on discounted existing properties - cheaper and less risky than new development
    • Less leverage will be used
    • “ C” centers will die and be reused for something else
    Bulmash Real Estate Advisors, LLC
  • 13. Bulmash Real Estate Advisors, LLC 4050 Oxford Court Beachwood, OH, 44122 Phone: (216) 496-0651 Fax: (216) 292-4486 [email_address]  

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