Online retailing continues to accelerate and it’s causing a shift in the business models of retailers and by extension, it is also causing a shift in the business models of landlords that provide space to retailers.

The shift in the underlying shopping model has taken some shine out of Black Friday. People used to line up at midnight waiting for the doors to open, now there are more people surfing and sitting by their laptops.

Anchor stores at malls like JCPenney and Sears are the ones to look out for. The continuing issues over competitions for brick and mortar retail from internet  sales as well as the recent shift in demand for retail usage has led to value decline in certain areas, according to Fitch Ratings analysts. They said that it is hard to recognize which shops will remain competitive in ten years.

Retailers that are major CMBS tenants have posted mixed results. Sears reported a 3Q12 loss of nearly $500 million and said same-store sales fell 4.8% at K-Mart and 1.6% at Sears stores. The company noted declines in groceries and consumer electronic sales.

Gap reported a profit gain of 60%, but had previously announced the closing of 20% of North American stores within two years. The company’s square footage occupancy dropped 2% year-over-year.

For retailers that will succeed, there is still some uncertainty over how much tenants will be willing to pay for rent.` Tenants are willing to pay a certain amount of rent as a percentage of their sales and some malls still have the high ratios that don’t adequately reflect sales.

Moody’s Investors Service commercial real estate team said that it found many retailers are looking at upcoming lease expirations as an opportunity to either take a smaller space or reduce rent.

 

 

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