Nevertheless, the numbers we review tell only part of the story. The biggest retail property transactions were occurring at the corporate level, in a pattern that has affected this entire sector since the advent of the current generation of REITs. Rodamco North America will now control 36 regional malls with 40 million square feet of space in 15 states. And Burnham Pacific was looking to liquidate its portfolio of retail assets, with several deals on the table throughout the quarter. Retail properties have found themselves squeezed.
Institutional capital is skeptical of investing in anything but a market-dominant center.
Those who own the best stores are loathe to part with them, as the ability to recycle the capital in this sector is limited. The bid-asked spread is therefore quite wide, putting a drag on transaction velocity and volume, which further depresses the market. The anxiety evident in Fed watchers in the first quarter of 2001, and the talking-down of the economy by the White House as it attempts to sell its tax cut to Congress, makes it unlikely that retail will be turning around quickly this year. Even if the Fed's interest cutting regime has the expected stimulative effect, retail properties will not see the benefit until the end of 2001 at the earliest. There may be some swans out there in the market, but right now the conventional view is that shopping centers are the ugly duckling of commercial real estate.