STORE CONSOLIDATION CAN HELP MALLS

It wasn't long after the Kmart/Sears merger agreement that two other big department stores chains — Federated and May — started flirting with the same idea. Consolidation is in the air, and that can be a good thing for malls, says Friedman Billings Ramsey (FBR). Owners of top properties can redevelop vacant space and add more rent to their revenue. FBR's Mall Sales Monitor reveals that mall sales growth is not dependent on department store sales growth. In January 2005, mall sales rose 1.9 percent on the FBR Mall Monitor; department store sales grew just 1 percent. A year earlier, mall and department store sales growth were equal.

ANNUAL REGIONAL MALL VS. COMP STORE SALES GROWTH
MALL SALES MONITOR DEPT. STORE SALES MONITOR
Jan03 1.5% (4.1)%
Feb03 (1.6)% (4.9)%
Mar-Apr03 0.3% (5.6)%
May03 1.1% (1.0)%
Jun03 1.8% (2.6)%
Jul03 1.6% 0.9%
Aug03 0.5% 1.4%
Sep03 4.8% 1.8%
Oct03 (0.1)% (3.2)%
Nov03 1.5% (1.3)%
Dec03 2.6% 0.9%
Jan04 4.5% 4.5%
Feb04 6.1% 6.0%
Mar04 6.2% 6.3%
Apr04 3.5% 1.1%
May04 2.6% 1.1%
Jun04 2.6% 1.4%
Jul04 0.7% 1.1%
Aug04 0.6% (1.7)%
Sep04 0.5% (0.7)%
Oct04 5.3% 1.3%
Nov04 (0.2)% 2.0%
Dec04 0.8% (0.3)%
Jan05 1.9% 1.0%
Source: Friedman Billings Ramsey

COSMECEUTICALS

A new word has entered the lexicon of the retail industry: cosmeceuticals, referring to products that form the nexus of cosmetics and pharmaceuticals. The category includes skin care, makeup and hair care products. With so many metrosexual men now in the once-exclusively women's skin care market, cosmeceuticals are certainly taking off, according to MarketResearch.com report.

THE BIERI REPORT: PITTSBURGH

PITTSBURGH
SHOPPING CENTER RANKING
Beaver Valley Mall C+
Century III Mall C+
Galleria at Southpointe C+
Monroeville Mall B
Prime Outlets at Grove City B
Ross Park Mall A
South Hills Village B+
Station Square C-
The Mall at Robinson Town Center B+
Westmoreland Mall C+

In the greater Pittsburgh area, the only geographically convenient place for central shopping is downtown. Previously, there was great hope when two new department stores opened in the heart of the metropolitan hub. Those two stores in the Golden Triangle have since closed, however, and serious shoppers have retreated to nearby shopping centers in outlying locations. Topographic challenges have a lot to do with retail traffic patterns in the Pittsburgh region. Area rivers and mountains make cross-regional shopping difficult. Ross Park Mall has the best traffic and tenant mix in Southwestern Pennsylvania. The Mall at Robinson Town Center is the region's newest and it shares customers with South Hills Village and Galleria at Southpointe. Shady Side is a quaint, upscale village of boutique shops. Monroeville Mall has a new owner and will be undergoing a renovation. Pittsburgh Mills will open this year.

The information presented for traffic estimates and regional malls is gained from a variety of sources used in developing the Bieri Market Reports. These sources are public and private, and may even include the developers themselves. When traffic counts are not available, grades are determined by reviewing sales of anchor stores and specialty tenants within a subject project, and then comparing those with like projects.

RANK AND FILE

San Diego is expected to lead the nation in rent growth, post the second-lowest vacancy rate and rank in the top 10 in both retail sales and household growth, making it the top market, according to Marcus & Millichap's 2005 National Retail Index. The top 10, based on a series of 12-month forward-looking supply and demand indicators, didn't change from last year, though there was some movement, with San Diego moving from No. 3 last year to the top spot, overcoming Orange County which moves to second place.

National Retail Index
MSA RANK 2005 RANK 2004
San Diego 1 3
Orange County 2 1
Washington, D.C. 3 2
Fort Lauderdale 4 4
West Palm Beach 5 7
Riverside-San Bernadino 6 6
San Francisco 7 5
New York City-Manhattan 8 9
Los Angeles 9 8
Oakland 10 10