Retail Experts Discuss Industry Hurdles

These are excerpts from a roundtable discussion sponsored by Real Estate Media and Sperry Van Ness. The full text will appear in the December issue of Real Estate New York magazine.

NEW YORK CITY-Retail observers could see some store closings and chain-store bankruptcies on the horizon as a result of challenges facing the economy, including the recent credit crunch, according to a panel discussion here at the Penn Club of New York. Expect closures by tenants that almost exclusively inhabit B centers, they said.

“Lower-quality tenants could have bankruptcies, hitting low-end mall REITs,” said Ambika Goel, a retail-REIT analyst at Citibank. Developers of shopping centers could also pull back construction, she said.

Some specific sectors of the industry that could have trouble are dollar stores and lower-end apparel chains, said Leo Ullman, chairman, chief executive officer, and president of Port Washington, NY-based Cedar Shopping Centers. Meanwhile, expect grocers and warehouse clubs to perform well, he said.

Patrick Breslin, president of brokerage firm GVA Williams’ retail group, said with rising rents in some areas and lower sales, other retails could feel the crunch. Rents in some non-Manhattan areas of New York City, such as Fulton Street in Brooklyn, and Fordham Avenue the Bronx, have in some cases shot past Chicago’s Michigan Avenue.

“The rents are getting so enormous that the strongest retailers in the world are going to have trouble,” he said.

Josh Podell, a vice president of real estate at Jones Apparel Group, agreed. He said that it was easy for his company, which operates chains under Jones New York, Nine West and other brands, to get into B-quality assets, but the skyrocketing rents of A properties are another matter. “You’ve seen the gap widen dramatically from the AAA properties to everything else,” he said.

Moderating the panel was Joseph French, a Sperry Van Ness senior investment adviser.