MIAMI-An overall nervousness in the market is making retailers delay decisions and consolidate, while retail property owners are forced to offer concessions, according to expert panelists who spoke at a program hosted by Commercial Real Estate Women Miami and Commercial Industrial Association South Florida at the Hyatt in Coral Gables Tuesday. Fear is driving the market, and even healthy retailers are getting rid of 10% to 15% of their real estate portfolio, said panel moderator Carol Wyllie, executive vice president of the Miami Lakes-based Graham Companies. Panelists agreed that rough times lay ahead for the retail market in the next few years.

Paco Diaz, senior vice president with CB Richard Ellis in Miami, said the biggest change that has taken place over the last year is that we are now in a tenant-driven market. Owners are offering substantial concessions, panelists agreed, and tenants are demanding rent reductions, reduced annual escalations and improvement allowances.

“Take care of your tenants, and work with those that are deserving,” Diaz advised owners. “Hang on to whoever you can until 2011, because by then it’s going to be a landlord’s market again.” Retail developer Bill Ogden told the audience that now is the time to invest in properties to make them better, commenting that the market is moving from an era of development to an era of management.

Diaz told the gathered audience that Miami-Dade County could see a 90% occupancy rate in 2009, but that “all in all, that is not so bad.” According to panelists, rents in the county are expected to come down another 10% to 25%, but point out that from 2002 to 2007 the region was enjoying very high rents and now we’re going “back to basics.” Even high-end retail has seen 20% to 25% rate drops, said Mia Stierheim, a retail specialist with Stierheim & Wesson Retail Realty Inc. in Miami.

There is a shift in the type of tenants that are leasing in retail centers because of a loosening of standards, she said. There are now more opportunities open to ‘mom and pop’ shops. Vacated spaces are giving retailers who are looking to fill gaps in the market new options, added Diaz. Big boxes like Walmart and Sam’s Club are just an example of a few retailers interested in space within Miami-Dade County, he said.

Seth Gadinsky, president of Miami Beach-based Gadinksy Real Estate, says more suffering in the retail market could be mitigated if landlords are willing to work with tenants. After the panel discussion he told GlobeSt.com that the best advice for owners is to “get your head out of the sand if it’s there.” The downturn has been focused on the residential market, he said, but after January there will be a focus on commercial real estate. Be proactive, he advised, by talking to lenders now about potential problems in the future.

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DALLAS-In a world of economic uncertainty, commercial property values are heading into muddy waters. Whether values plummet or stay flat in North Texas remains to be seen, but it’s a surefire certainty that the steady increase in years of late has come to an abrupt halt.

Dallas County, which has about 100,000 property tax protests annually, has a commercial base of $83.5 billion. Tarrant County, with roughly 70,000 protests annually, has $31.8 billion of commercial properties, excluding commercial land.

“Because of the lag in the appraisal and assessment process, there will be some delay in the effects,” says Dr. Ray Perryman, one of the state’s leading economists. “It is nothing like the national situation, but does have the potential to impact appraised values and tax collections on a temporary basis.” The founder of Waco, TX-based Perryman Group adds that “it shouldn’t last long,” given the relatively strong multifamily and commercial markets.

Because there are so few sales these days, experts are having a difficult time measuring or even projecting the impact. According to CB Richard Ellis, office sales are averaging $168 per square foot; industrial, $57 per square foot; and retail, $133 per square foot. The multifamily market’s average is $57,400 per unit in the region.

Ben Loughry, managing partner in Fort Worth for New York City-based Integra Realty Resources Inc., tells GlobeSt.com that he’s bracing for a 25% drop in retail property values and 10% to 15% dip in office values. “Industrial will fare pretty well,” he says, citing the severity of the pullback in consumer spending as the determining factor. Multifamily assets are “the bright spot,” he says.

Loughry believes it will be the biggest setback since the 1980s. “It’s relative to where I see the softness in the market. Retail is the area that has the most vulnerability in the market,” he says. “We have not seen the other shoe drop yet.”

The impact will be more evident when there are more transactions to gage the market, which Loughry says will come at year’s end or early 2009. “There is definitely going to be some adjustment in the ad valorem values in 2009 and probably 2010 also.”

George Roddy, president of Carrollton, TX-based Roddy Information Services, is more optimistic than Loughry. Roddy says single-family properties will dip 2% to 3% while commercial values will drop, with property type and location as the basis. “The perception is greater than the fact as far as decreasing values,” he contends. “We’ve not seen any decrease as it relates to commercial properties.”

Roddy acknowledges 2009 could be rough in some sectors, specifically suburban cities like DeSoto and Cedar Hill, where a decline is starting to emerge. “They could lose more than 4% to 4%,” he says.

Roddy, like Loughry, says retail will be the hardest hit. But, he’s also quick to point out there are plenty of investors on the sidelines with capital earmarked for bargains. “When they come in here, pay retail and are glad they bought the property, just think what they’ll think if they can come in and get some bargains,” he says.

Steve Triolet, CBRE’s research manager in Texas and Oklahoma, says property values are being discussed in all camps. “It’s pretty safe to say, prices will drop in 2009, but the question is how to quantify it,” he says. “I don’t think they’re going to drop as much as people anticipate.”

Like Roddy, Triolet says there are bargain shoppers on the sidelines waiting to make their moves. And like the others, he says retail will be the hardest hit in values.

Because North Texas is still adding jobs and population, Triolet says the drop in values will be far less than other parts of the country. How much depends purely on how long the economic downturn lasts. “If it’s longer than late 2009 or 2010, that’s when we’re going to see more dramatic drops,” Triolet says. “We have a lot of momentum right now although it’s slowly dissipating. I think if it’s only a year, we can ride that out pretty easily.”

Chief appraisers in Dallas and Tarrant County say it’s too early in the data-gathering process to say if values will stay flat or decline. Neither Dallas’ Ken Nolan nor Tarrant’s Jeffery Law is expecting their values to climb. “Flat would definitely the point I’d be at right now if I had to guess,” Law says.

Nolan says he’s not drawing any conclusions right now. “We’ll do what the market tells us,” he adds. “Things are changing daily. We have no sales transactions so no one seems to know.”

The chief appraisers and their teams will set values Jan. 1, with notices going out May 1. Municipal leaders should, if they aren’t already doing so, prepare for revenue losses due to changing property values. “The bottom line is that revenue growth will be slower than normal which will require some planning,” Perryman cautions.

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