Commercial Real Estate Finance

Posts Tagged ‘Circuit City’

Week in Review for April 7 – 13:

- Washington, D.C.-based alternatives manager Carlyle Group prepares for an IPO, which Reuters predicts could fetch as much as $800 million. The initial public offering would bring 10% of its management company to the public.

-  The first quarter of 2012 saw a decline in U.S. CRE demand. However, analysts point out, diminishing inventory has softened the impact of this decline.

- After years of growth, big-box stores are losing their appeal for many retailers. This is a consequence of increasing online shopping, which has forced the closures of Circuit City and, more recently, Sears, Kmart, and Best Buy locations. Even retail giants like Target (TGT) and Wal-Mart (WMT) are moving toward smaller-scale retail stores.

- In Washington, D.C., upgrades to Union Station are expected to benefit the area’s nearby commercial tenants.

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How does this affect the commercial real estate industry?  I began thinking about these questions after driving by the local Borders bookstore (NYSE: BGP), though it wasn’t the first time I’ve had these thoughts. After seeing empty storefronts previously occupied by Circuit City, Tweeter, Steve & Barry’s and Blockbuster over the years, the surprise wore off fairly quickly. For those who haven’t heard (or seen), Borders Group, the second largest bookstore chain, announced last Monday that they were abandoning an upcoming bankruptcy auction after failing to attract a white knight. As a result, the liquidation process has already begun– setting in motion the closure of 400 stores and laying off nearly 11,000 workers.

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When big box retailers go dark in a sour economy, much like Linens ‘N Things or Circuit City (CCQ.F) did last year, it is hard to back fill that space. There simply aren’t enough huge retailers looking to expand when store sales are down and economic forecasts are skimpy.  Furthering the plight of big box developers and landlords are that smaller, more efficient shops are popping up in malls and strip centers. A similar phenomenon is happening right now with destination spas, whose revenues have plummeted due to competition from its smaller, more efficient brethren. Read the rest of this entry »