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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Les H who wrote (29601)	10/14/1999 11:26:00 AM
From: Les H	Respond to of 99985

S&P on potential negative effects of internet on real estate biz.yahoo.com U.S. retail real estate market faces risks - S&P NEW YORK, Oct 14 (Reuters) - Aggressive spending by consumers on goods and services has been a boon to the U.S. retail property sector as new stores and outlets are built to meet so much shopping demand. But there are concerns about what will happen to retail real estate should the spending habits of consumers turn more conservative, according to analysts at Standard & Poor's, who said the sector could find itself with an oversupply of retail real estate. Peter Kozel, head of real estate research at S&P, said that -- in addition to the normal supply and demand cycles in the retail property sector -- Internet sales of goods and services could pose a further risk to the bricks-and-mortar growth of retail space. If every consumer who turns to buying goods online translates to one less customer in the stores, the Internet could ultimately take a huge chunk out of the demand for retail real estate, Kozel said. Real estate fundamentals are currently sound, said S&P analysts during a teleconference this week to discuss the agency's quarterly report on the commercial mortgage-backed securities market. The economy continues to expand and loan delinquencies are at an historical low, the analysts said, all of which is good for the real estate market. But the balance of supply and demand in some property sectors may have already peaked, they said, and a lot of focus is being put on retail real estate. The retail property sector is currently booming, said Kozel, who added that consumers are spending so heatedly that, according to government figures, they have slipped into a negative rate of savings versus disposable income. ``Consumers have been extraordinarily aggressive over the last three or four years,' Kozel said, noting that government data show the ratio of savings versus disposable income dropped to negative 1.1 percent in the third quarter. That spending is good for retail sales and properties right now, but the concern is that it is not sustainable, Kozel said. When consumers decide they need to begin saving money again rather than spending it, the retail sector could be in for a weaker pace of growth, he said. Meanwhile, the Internet poses risks that no one yet has a clear handle on. Kozel said that some forecasts place the rise of Internet sales from $12 billion currently to $41 billion in coming years. If those online sales were to translate to an equal dip in retail demand, and thus retail space, as much as a third of retail space demand could eventually be removed, Kozel said. However, Kozel said, it remains to be seen whether the effect will be that drastic. ``Nobody has a good idea how large the influence (of the Internet) could be,' he said.