ICSC Sees ‘Better Times Ahead’

The retail industry is turning around, according to Michael Kercheval, president and CEO of the International Council of Shopping Centers. But a recovery might take a little longer than other areas of the economy, he says in a report looking back on 2009.

“It could take 1.5 to 2 years before we are likely to see a full recovery in the shopping center industry,” Kercheval writes.

The good news, he says, is that same-store sales during the holiday season could rise between 2% and 4% this year. While that isn’t a major jump, it’s a lot better than some of the dismal declines we were seeing over the last year.

So it sounds like we are on a slow road to recovery. Do you see that happening more quickly, or will the road be slower?

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11 Responses to “ICSC Sees ‘Better Times Ahead’”


  1. 1 Larry Ortega December 15, 2009 at 9:24 am

    If there is a “Hurricane Alley” in the southwest, Phoenix is certainly in the direct path. Our vacancy rate continues to climb and the projects in the “periphery” continue to underperform.

    Phoenix’s recovery, like Las Vegas and regions in Florida and other SE regions may suffer much longer than the a year or two….more like double that.

    • 2 Chris Corso December 15, 2009 at 1:17 pm

      I am with Larry as I am in Phoenix. There was so much speculative Development going on here based on population growth that just never materialized to the numbers that were foretasted. Now we have an over supply and I mean over supply. The result, Tenants who got in over they’re heads, high vacancy and plummeting rental rates. If you don’t a;ready have a 5 point harness seat-belt you may want to get one…it’s gonna be an interesting 2010.

  2. 3 Gabriel Rizk December 15, 2009 at 11:47 am

    Interesting. I certainly hope Mr. Kercheval is correct.

    The American consumer is always ready to return to what he sees as normalcy. The talk of the Recession’s end may indeed inspire confidence and lead to more market activity. As Mr. Kercheval said, times like these produce pent-up demand.

    But what does the average consumer do with considerable demand and no money with which to stay active in the market? What if the consumer has too much money and now suffers from hyper-inflation?

    My hope is that we pull out of this unscathed – but I wouldn’t base that hope on anything Bernanke says.

  3. 4 Lloyd December 15, 2009 at 12:39 pm

    I like the optimisim but over the last several years the same store sales declines have been near double digets. Only when the financial markets crashed and development hit the wall did we reconize how poorly existing stores have been doing for a long time. So a percect or two positive sales gains here and there might make you feel better but it is still a long way from any sort of recovery. Until we can get a handle on the unemployment and see the banks LENDING again we will not see any sort of recovery. I think the current increase in sales is based on the perception that the current govt is going to tax everything you get tomorrow anyway. With that in mind,I think I will go shopping now.

  4. 5 Wayne Prescott,MAI, CCIM December 15, 2009 at 12:47 pm

    My observation has been that you can’t generalize on this question. Established malls in established markets will recover much more quickly than newly constructed, never fully leased neighborhood centers in formerly “growing” communities. Here in the SF Bay Area, I’m talking about a mall on the Peninsula vs. a new center in the Central Valley in a city like Paterson or Merced, for example. My observation, and my conclusion in the appraisals we’ve written ove the past year, have ranged from 2-4 years to get back to stabilized income and expenses, depending on the local supply of, and demand for, competing space.

  5. 6 David McAlister December 15, 2009 at 1:15 pm

    Consumer spending may be up and the holiday rush may help, but the role that the banks play in financing and refinancing these centers is still up in the air and I think that’s a pretty critical piece of the puzzle.

  6. 7 carol gies December 15, 2009 at 1:18 pm

    We think ICSC’s 1.5-2.0 year ‘full-recovery’ forecast is very optimistic, for these reasons:
    (1) The shopping centers’ 10% average vacancies will have to be absorbed by expanding retailers, who have closed an estimated 150,000 units over the past two years–and now are finding it difficult to obtain credit for inventory purchasing or expansion.
    (2) The retailers’ expansion will have to be driven, in turn, by DISCRETIONARY consumer spending, which will not return to full volume until job growth turns positive, home values rise, and 401ks are restored–and that is not likely in 18-24 months.
    (3) Baby Boomers, the largest demographic segment that drove the last two post-recession recoveries, are now moving out of their acquisition years and trying to re-build their damaged retirement nest eggs.
    Shopping centers will certainly rebound, but the curve will be much more gradual than previous cycles.

  7. 8 Kelly Ellis December 16, 2009 at 10:11 am

    I agree with Carol. Too much debt, job recovery not coming soon enough, and global tensions will keep this recovery away for retail for some time. In addition, I think the average retailer as well as the consumer both are now working in a new age of frugality, where every dollar managed more carefully. Wasteful spending is a thing of the past, and smart spending will be the new paradigm, more like a permanent downward adjustment that should carry us through the next 10 years or so.

  8. 9 Weed Removal December 17, 2009 at 9:02 am

    Methinks we have one more “bottom” in Q1/2010, where closure decisions are made from Holiday ’09 sales. Hold your breath a little longer folks.

  9. 10 Dunkin'man December 17, 2009 at 10:16 am

    I believe all the above posts reflect a more realistice view of the world (US) than the “paid to be optimistic” ICSC.

    Stated unemployment hovers at 10%, compared to last years 7+%,
    and combined with those underemployed and thohse who have given up or have run out of benifits, we approach 17%.

    How in Simons’s name can we expect better sales….

  10. 11 Market Participant December 17, 2009 at 10:34 pm

    ICSC is channeling NAR’s David Lereah. Unemployment is still way to high to support the current level of retail space. Any recovery will be quite gradual. Some centers will end up being long term under-performers due to low long term rents and expensive financing put in place during the Great Recession.


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