Retailers: A Longer-term Global View

04/30/2003 |

ResearchWorldwide.com – The Worldwide Commercial Real Estate Information Portal (www.researchworldwide.com) – offered the real estate community the following global information regarding the retail marketplace:

Many parts of the world are experiencing plunging consumer confidence levels. In the United States alone, a nine-year low in consumer confidence has recently been recorded, while France reported six-year lows. Short-term negative sentiment is expected as the Iraq War continues to create worldwide consumer uncertainty. Rising oil and gasoline prices, as well as increasing unemployment, coupled with the possibility of a global recession, goes a long way toward keeping worldwide consumer markets nervous.

Only improving economic growth, increasing employment levels, and increasing remuneration levels can inject consumers with confidence. With two-thirds of the world’s developed countries’ economies accounted for by consumer spending, this becomes a “Catch 22” scenario.

However, a solution may present itself from the East. Asian economies, excluding Japan, are expecting a drop in interest rates to encourage consumer and investment spending and to counter the inevitable fallout of the Iraq War. China remains one marketplace where the government is encouraging consumer spending to maintain a 10-percent p.a. growth rate to compensate for planned cutbacks of the State’s capital expenditure program.

“So where does this leave global and local retailers? They certainly have some tough decisions to make. Do they curtail their store location expansion plans or, do they bite the bullet and continue expanding, awaiting the inevitable return of consumer confidence, possibly during 2005-2008?” asks ResearchWorldwide.com.

With a normal planning cycle of research, site location, planning permission, acquisition, finance, construction, fit-out, stocking, staffing, and store opening invariably taking in excess of three years, an investment into new stores opening from 2006 onwards goes to the heart of commercial real estate decision-making. In short, do you wait for clearer signals of an upswing or do you develop in a downturn?

“Taking heed of the examples set by the world’s largest retailer’s development strategy, Wal-Mart last October committed $11 billion in capital expenditures to open some 445 new stores in many of the countries in which it currently operates. In turn, Wal-Mart expects its sales to increase by over $25 billion during 2003,” ResearchWorldwide.com explains.

“Retail investment is for long-term players. Riding out short-term wars and plunging consumer confidence is simply part of the process for long-term players. Access to local market intelligence and local marketplace experts is a vital ingredient for long-term success in commercial real estate.”


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