Fitch: US CMBS Retail Will Be Steady Amid Macy's, Other Closures

The following is from Fitch Ratings on September 23:

The CMBS retail sector will continue its slow, steady recovery, despite recent store closure announcements, Fitch Ratings says.

We expect the recovery to go on as vacancies remain low, rents have modestly risen and net absorption has been on the rise.

Macy's announcement last month that it would close approximately 100 of its full-line stores (15 percent of its current 675 full-line locations) was only one of a number of recent closure announcements from retailers. This week, Kmart announced the closing of 64 stores. Aeropostale, which filed Chapter 11 in May, will close approximately 550 stores. Finish Line is slated to close 150 stores over the next 48 months and Office Depot announced 300 store closings over the next three years. Anchor-tenant closures, such as Macy's, could have a further negative impact on malls if the loss of Macy's triggers co-tenancy clauses with other tenants.

However, regional mall performance has trended slightly better recently. Regional mall vacancy saw a slight increase in second-quarter 2016, ending the quarter at 7.9 percent, up 10 bps from the previous quarter. Mall rents rose another 0.5 percent, ending the quarter at $41.98 per square foot. Net absorption (a measure of occupancy) rose in the second quarter, though the levels of space absorbed remain low by historical standards. Reis data says new completions for neighborhood and community center spaces declined during the quarter -- the lowest level of quarterly completions since second-quarter 2013. Vacancy for neighborhood and community centers experienced a modest decline of 10 bps to 9.9 percent while rents rose 0.4 percent to $20.28 per square foot.

Consumer confidence remains strong and, despite weaker-than-expected retail sales in July, most forecasters expect consumer spending to strengthen throughout the rest of 2016. Malls have also benefitted from the rise in nontraditional tenants. Restaurants and service providers (nail and hair salons, spas and health clinics, among others) continue to see strong growth and have been leasing space in growing numbers.

The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at fitchratings.com. All opinions expressed are those of Fitch Ratings.

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  • Alexandra Scarborough
    Papyrus Joins Forces with Designer Lela Rose

    Papyrus is looking to bring the “elegance and style” of fashion to its greeting cards via a new designer collaboration series.

    According to a release, the collaboration marks the first time a fashion design house and greeting card brand have joined forces to develop a custom greeting card collection.

    Papyrus said it is partnering with American fashion designer Lela Rose to introduce the series. Rose will feature her "sophisticated yet modern style" in the debut card and gift collection, slated to launch during New York Fashion Week. The collection will be available in New York City Papyrus stores and select retailers in September, with availability expanding to all Papyrus locations and retailers in October.

    "The fashion designer collaboration series is a celebration of the commitment Papyrus has to the arts, including a focus on the fashion industry, quality craftsmanship and trend-forward design," said Christy Kaprosy, President of Papyrus-Recycled Greetings. "We are delighted to have Lela Rose's elegant line lead the first Papyrus fashion designer collaboration program, and we are excited to bring more fashion designers to our loyal customers in the future."

    The company noted the collection, which draws inspiration from some of Rose's recent runway designs, consists of 16 cards and five gift accessories, including gift bags, gift tissue, roll wrap and a gift tag set. It also will be available online at papyrusonline.com

    "I'm thrilled to be the first designer to collaborate with Papyrus on their exclusive new fashion series," said Lela Rose. "This is a unique way to showcase our designs, silhouettes and prints, and extend the brand into a new category."





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