From a small northwestern observatory…

The Marcus and Millichap 2012 Annual Retail Report just hit my desk.  It’s a great compendium — one of the best retail forecasts in the industry — and not only looks at the national overview but also breaks down the forecast by 44 major markets.

A few key points:

• What they call “sub-trend” employment growth will prevail until GDP growth surpasses 2.1% (we would add:  “…sustainably passes….”)  Increased business confidence will continue to transition temporary jobs to permanent ones.
• Most retail indicators performed surprisingly well in 2011, defying a mid-year plunge, a slide in consumer confidence, and a modest contraction in per-capita disposable income.
• The Eurozone financial crisis could undermine the U.S. recovery, but fixed investment will remain a pillar of growth, with capital flowing to equipment and non-residential real estate.
• All 44 markets tracked by M&M are forecasted to post job growth, vacancy declines, and effective rent growth in 2012.
• A rise in net absorption to 77 million square feet in 2012 will dwarf the projected 32 million SF in new supply, with overall vacancy rates tightening to 9.2%.
• However, some major retailers, most notably Sears and Macy’s, will continue to downsize or close stores that fail to meet operational hurdles.
• CMBS retail loans totalling $1.5 Billion will mature in 2012, but many may fail to refinance — about 81% have LTV’s exceeding acceptable levels.
• The limited number of really premier properties in the “right” markets will hit what M&M calls “high-high” price levels, moving some investors into secondary markets as risk tolerance expands and capital conditions become more fluid.

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