http://www.marketwatch.com/news/story/black-friday-sales-chalk-up/story.aspx?guid=%7B0522EC5F-4058-46A3-B8F4-32ABF67831D9%7D&dist=msr_1
While black friday may have experienced a 3% pop, it is highly questionable whether the sales momentum can continue.
Take for example the venerable South Coast Plaza, the third largest shopping mall in the United States, located in the heart of wealthy Orange County California. This mall which was virtually immune to the dot-com-bust of 2001, has probably seen better times.
At first glance the mall was fairly packed today (12/8/08). But compared to previous years Southcoast Plaza was surprisingly devoid of shoppers just 2 weeks from Christmas. There were no massive traffic jams from Bristol and Bear exits spilling onto the 405 and 55 freeways - in fact there was no traffic at all. The parking lots were fairly empty. Here's a picture of the Sak's Fifth / Bloomingdales parking lot - locations that would have been completely packed in previous years.
Inside the mall told a similar story. Yes, Bloomingdales was quite busy with people actually making purchases. The other department stores (Sak's, Macy's, Sears) also drew a bit of traffic (but lighter). Traffic was heavy at certain stores such as Sephora, but fairly light at last year's darlings such as Bath & Body works. At the high-end there was exactly 0 people and five very bored sales inside Harry Winston's and only a few people in Gucci and Cartier. Traffic in Anne Klein was sparse.
Overall the mall traffic was what I would consider heavy for most malls but fairly light for Southcoast Plaza during christmas season.
But most shockingly, unlike previous years where you could not help but bump into shoppers with multiple and massive shopping bags, most shoppers were not carrying anything!I was hard pressed to find ANY shoppers with multiple bags. It seemed like most of the shoppers had come out just for the mall experience, but were not purchasing.
This may indeed confirm indications of a US consumer firmly battened down for a bad recession and refusing to spend. If true, this will be devastating for commercial real estate, especially mall operators. Having made aggressive investments over previous years, many of the mall operators like Simon Property Group (SPG), Westfield, General Growth Properties (GGP), Macquerie (MAC) are relying on increasing rental income to facilitate debt re-financing and to avoid asset write-downs. However with a large chunk of debt due in the coming years and the likelihood of decreasing operating income as consumer spending decreases, it is very likely that most of the heavily leveraged mall operators will start running into big trouble. Furthermore, aggressive over-expansion in the last few years coupled with retail contraction can leave millions of premium retail space devoid of tenants, further putting downward pressure on operating income. Already with many anchor tenants such as Mervyns, Circuit City, Linens N Things either exiting or getting ready to exit their leases, and other big name retailers such as Macy's, JC Penny, Sears, etc. all in trouble this disaster is only beginning to unfold.
-gh
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