Since reaching their performance peak in mid-2007, retail properties have realized only 50% of their likely revenue declines, Fitch Ratings says in its weekly U.S. CMBS Market Trends newsletter.
Fitch expects the average retail revenues will decline 20% from their 2007 highs. So far, average declines have been on the order of 10%.
‘Although a modest increase in 2010 sales is projected, this is unlikely to rescue the many properites with severely eroded equity positions,’ the newsletter says.
Falling rents and ‘significant retail bankruptcies’ have contributed to the revenue declines.
‘Because retail sales have been on the decline for two years and rolling tenants will typically renegotiate lower rental rates as their leases expire, most retail properties have only seen 30% of their potential in-line base rent declines,’ Fitch says. ‘With the majority of a retail property's revenue generated from in-line base rents, retail properties may have realized only 50% of total potential revenue declines.’
From November 2009 to this month, retail delinquencies for Fitch-rated CMBS transactions have risen from 3.55% to 4.94%. Fitch expects retail delinquencies to reach 8% by the end of the year.
SOURCE: Fitch Ratings
