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Shopping Centers Today -> March 2002
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IS THE RECESSION OVER — OR WHAT?
Talk about a quick turnaround. Barely had economists, in November, identified March 2001 as the start of the U.S. economic recession than they were predicting that it would begin to rebound by mid-2002. Then in late January the Commerce Department reported that gross domestic product grew 0.2 percent in the fourth quarter of 2001, prompting some experts to declare that the recession — and some wonder if it is a recession at all — is over. So what is going on? Shopping Centers Today asked industry participants for their takes.
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| Kieran Quinn |
Some economists are saying that the economy will begin to recover from recession in mid-2002. How will this affect retail real estate?
Real estate is a lagging indicator in the economy. Even though we are just coming out [of the recession], companies that make decisions about space are reacting to the last six months. I believe we’ll still have less demand for office space and, potentially, retail for the next 12 to 18 months. — Kieran Quinn, president and CEO, Column Financial (commercial mortgage lender), Atlanta.
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| Irwin Cohen |
The inventory-to-sales ratio is now very low. [U.S. Commerce Department research shows that nonauto inventories were down nearly 2 percent versus a year ago. Though sales growth slowed also, retailers were not overstocked]. The ratio is very well positioned at this point; retailers have got a pipeline that needs to be filled up. This has been different from prior recessions in that the consumer still wants to spend. — Irwin Cohen, global managing director, consumer business practices, Deloitte & Touche, New York City.
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| Greg Mount |
If you look at consumers, they behaved nothing like they would during a recession. They were spending at a level of 3 percent over a year ago — about the way they were purchasing in 1995 and 1996, when we were smack dab in the middle of an expansion. Another point: Manufacturers bore the brunt of this slowdown. Consumers were spending at a 5 percent year-over-year clip in 1999 and 2000. That was phenomenal, but a lot of businesses kept producing as if that 5 percent rate would never end. The unemployment rate is not expected to make it above 6 percent. — Greg Mount, deputy chief economist, Bank One, Chicago.
It’s going to be a conservative year. Consumers will continue to be moderate in their spending, and I don’t see that changing anytime soon. — Paul Kiratzis, vice president, specialty leasing, Zamias Services (retail property developer), Johnstown, Pa.
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