Advent of the millennium on minds of retailers and customers.

As the New Year is just being ushered in, the advent of the Millennium seems to be the focus of store operators and consumers alike. A key to retailers capitalizing on this phenomenon will be the manner in which they position their goods and services to take advantage of the hype that the year 2000 is creating.

Yet as we look to what 1999 has in "store," we also need to be cognizant of the traditional factors that impact our industry. Were the trends that characterized 1998 an anomaly, or can we anticipate that the strong demand for space we experienced this past year will continue into the 21st Century?

From our perspective as both owner and tenant representatives, we anticipate a continued vibrancy in retail markets throughout the Metropolitan New York area this coming year. The demand for "quality space" will continue to outstrip supply. Rental rates for "prime locations" will remain at their apex, while selective market segments rents will inch forward, achieving new historical high levels.

We are firmly of the opinion that this trend will be characteristic of not only Manhattan, but will also be the norm in neighborhood "hubs" in the outer boroughs of Queens, Brooklyn, The Bronx and Staten Island. We anticipate a continuing resurgence of retail development activity in the downtown areas of lower Westchester's cities. We believe that retailing will also be thriving in the northern counties of New Jersey, with rents in shopping centers, strip centers and malls remaining firm.

Amongst the most visible retailing segments in an expansionary mode are the regional and national drug store chains. Their perception that our markets are under-served has created aggressive competition for sites in their quest to achieve market penetration goals. This will also be the case for fast food purveyors, restaurants, eyewear chains, mobile communications centers, home improvement products and discounters of all types of merchandise.

Those segments that will be adopting retrenching strategies include specialty clothiers, footwear, retailing banking, sporting goods, consumer appliances, electronics, and lady's and men's apparel.

There is obviously concern that the volatility in the financial markets will impact the environment for retailing. As major institutions create mega-mergers and Wall Street firms' lay-offs mount, there will most definitely be a ripple effect. Then there is the still serious monetary crises in the emerging markets of Asia, Europe and Latin America, which despite the lack of current media attention, bode ominously in our future.

It is no coincidence that the notoriety of Internet stocks and their seeming insatiable ability to gobble up funds bring attention to consumer buying patterns. There is a common perception that E-commerce is posing or will pose a serious threat to the viability of traditional retail formats.

At this juncture in time, we do not believe that Web purchases will materially effect retail rents or consumer purchasing habits. While E-commerce has been estimated at $5.8 billion in 1998, Internet shopping volume is projected to reach just $35 billion by 2002. In the scope of our nation's economy, where personal consumption in 1998 was $5.8 trillion, Internet shopping accounted for only 0.1 percent of the total. Sales of computers, books, music, software, travel packages and consumer electronics seem most susceptible to E-commerce. While cyberspace transactions will be gaining popular acceptance on the horizon, shopping will still remain a tactile sensory-based experience that will for long into the 21st Century.

This coming year will see frenzied activity on the deal-making front. Retailers will be directing a substantial amount of energy toward opening new stores in anticipation of the "Millennium Bonus" they envision. Property owners will become even more selective in accepting tenants. Landlords will not only be aspiring to maximize rents, but to achieve higher standards in store appearance and "rated" tenant credit worthiness.

1999 will most definitely be an exciting year for our industry. Professionalism, innovation and attention to detail will be the keys to success. The challenge for retail brokers will be to respond effectively and adapt to the factors that are contributing to a rapidly changing retailing environment.