Dismal Retail Sales are Having Negative Impact on Mixed-Use Development
- Jan 12, 2009
By Anuradha Kher, Online News EditorNew York–As we come out of one of the worst holiday shopping seasons in history, the retail sector continues to be hit with more bad news. Reports of bankruptcies, revenue losses and companies on the verge of shutting down keep on coming. While the multifamily sector is faring better than the doom-and-gloom results of retail, the major hits taken by this sector are having a big impact on mixed-use developments across the U.S., in its path negatively affecting apartment projects.“New mixed-use developments are dead for now,” David Jacobstein, chief advisor to Deloitte LLP’s Real Estate Practice, tells MHN. “Consumer confidence is down and demand for retail is low, retail sales are negative and many stores are filing for bankruptcy. All of this means that retailers don’t have any initiative to open new stores, many of which are located in mixed-use stores. This in turn, is having a negative impact on the demand for mixed-use product.” But more than anything, it is financing for mixed-use projects that has run dry. “Right now we are in a deep and long recession. Refinancing is not available. While apartments have been the strongest performers among all commercial real estate for a while now, the vacancy rates are on their way up and with the economy the way it is, vacancy is expected to rise further,” explains Jacobstein. All this explains why demand for mixed-use development is low.“Mixed-use projects will have a second life when the credit markets thaw and the economy picks up again,” says Jacobstein. “The near term forecast is bleak and until the credit markets thaw there is no hope. In the longer and medium-term, demand for mixed-use projects will return. This could happen anytime between late 2009 and late 2010,” says Jacobstein.He believes the impact of the stimulus package will be in two parts. “The investment in green technology and infrastructure etc. will take time to have any positive impact. Meanwhile, the fiscal side of it will be quicker. The tax cuts will boost the retail side and open up the credit markets. But this requires considerable government assistance,” concludes Jacobstein.