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The light at the end of the tunnel.

Retail indicators have always been used to measure the state of the economy. We enter 1993 facing an ongoing lack of consumer confidence that has been eroded by fears of unemployment.

New York City currently has an 11 percent rate of unemployment and the remaining 89 percent are keeping a tight rein on their pocketbooks just in case.

There is a light at the end of the tunnel, however. Business leaders have become increasingly optimistic about the new administration, which plans to make economic growth its top priority. Once the economy begins improving, businesses will begin hiring, leading to an increase in consumer confidence and a return to spending.

Regardless of the administration's success in dealing with our economic problems, the climb to recovery will be long and hard. As a result of the recession, there have been several long-term changes in the way companies do business. Many firms are now laying people off not because of specific economic problems, but because they feel the same job can be done by fewer people.

While the workforce has been permanently diminished in several industries, others can expect a boost from the new administrations plans to clean up the environment, improve the nation's infrastructure, offer job training and improve the United States' track record in high-technology. As these areas benefit from new jobs and workers, the retail industry can expect to reap rewards in terms of increased spending.

On the local front, the upcoming mayoral election should have a major impact on New York City's business climate. Any changes that a new administration can make in terms of tax reductions and improvements to our quality-of-life should prove beneficial for the city's retailers.

Retailers have also made permanent changes in the way they do business as a result of the recession. Almost across-the-board, they are reducing inventories to avoid excesses that, traditionally, require major end of season sales.

Computerized inventory operations that let retailers know exactly what is being purchased have become the norm. Even Macy's has finally computerized its operation, following in the footsteps of other retailers such as The Limited.

We can expect a number of major retailers to take advantage of recent trade agreements and low-cost labor by going to Mexico in the next few years. In the short-term, this will mean losses in American revenue, but it will pay off for consumers in terms of reduced prices over the long-run.

Since every cloud has a silver lining, it may not be surprising to learn that the recession proved positive for some retailers, most notably discounters. Budget retailers, such as 'Everything for a Dollar," "The 99 cent Shops," and "All for a Dollar" have flourished.

Other foreign and domestic retailers are taking advantages of a market that offers low rents, a variety of desirable locations, and, in some cases, landlord concessions such as free rent and workletters for major rated retailers. Numerous retailers are leasing space or expanding in the city, including Barami, Bed, Bath & Beyond, Chiavari, Coconuts, Cosmetics Plus, Hallmark, Innovation Luggage, Labels For Less, Lechters, Perugina Chocolate, Staples, Sam Goody, Taco Bell and Vitamin Quota.

Much of the upswing in retail activity is due to the perception that the market has finally hit bottom. Many retailers are doing well and are confident enough to sign long leases and expand in almost every market throughout the city.

New York remains a vital, dynamic place for retailers, and I believe the surge in retail activity will continue throughout 1993 as the economy improves.
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Title Annotation:Review & Forecast, Section I; new Presidential administration expected to stimulate economic growth and consumer confidence, in turn having positive effect on real estate market
Author:Friedman, Edward A.
Publication:Real Estate Weekly
Date:Jan 27, 1993
Words:583
Previous Article:Competition the bottom line.
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