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CRE Finance World, Summer 2012

Rising Online Sales Could Keep Retail Vacancies Elevated Table 1 Growth rates in Internet sales have also far outpaced those for Retail Vacancy Rate Estimates, 2012-2015 overall sales for these retailers (see table 2). However, Internet sales still typically account for less than 10% of their total sales. Table 2 Online Vs. Overall Sales Growth (2010–2011) And CMBS Tenant Rank Sources: Commerce Department, BLS, S&P. *forecast data in italics E-Commerce is Growing at Selected Firms An increasing number of companies now distinguish between sales made online from those at physical stores in their monthly performance reports. Several of these retailers are prominent Sources: Retailsails.com, Trepp LLC. *Ranked by balance of loans in which tenant is listed. tenants in both older and more recent vintage CMBS transactions, Still, sales growth rates for online retailers such as Amazon have which can have retail collateral exposures of 50% or more. Online generally been much higher than for traditional retailers over the sales as a percentage of total sales have increased for most of past two years. One exception was the number three-ranked tenant, these retailers over the 2007-2011 period (see chart 3). Macy’s, which reported a 40% increase in online sales during 2011. Chart 3 Higher Vacancies Could Put a Strain on Online Sales As A Percentage Of Net Sales For Selected Firms, 2007-2011 Retail CMBS Performance While online shopping won’t be the end of brick-and-mortar stores anytime soon, it does represent a growing hazard for store-based retailers. In addition, a rise in the vacancy rate could have a poten- tially negative effect on CMBS credit. New transactions with retail property concentrations of nearly 50% could be especially hard hit. Our retail vacancy estimates depend on several factors, including the overall economy, which is showing modest improvement at present. Still, we expect that a rising percentage of online sales may keep the retail vacancy rate elevated for quite some time, and CMBS transactions will likely continue to feel the pressure of occupancy declines among their underlying collateral over the next decade. (i)”Which Retailers Should Fear Amazon the Most,” Barron’s, 2/14/2012. Source: Retailsails.com CRE Finance World Summer 2012 30


CRE Finance World, Summer 2012
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