Housing, auto worries don't dampen retailers' optimism

Retailers expect their scanners to beep at a busy pace through 2007, but a government forecaster says slowing sales of big-ticket items such as cars and furniture could dampen the year's results.

At Summit Sierra, Senior Property Manager Larry Hunt says next year the center will continue to expand its merchant mix.

His prediction: "Strong growth here despite overall factors in the general economy."

At Meadowood Mall, General Manager Tony Vail also projects strong growth.

"We expect to continue to be very strong due to large number of new homes being built," he says.

In addition to nearly 5,000 new homes built annually in the region in recent years, Vail points to more jobs coming into the area and higher wages. With mall occupancy in the high 90 percent range, he says there is room for growth in the market. However, the Meadowood Mall's owner has no immediate plans to exercise its existing rights for a 1 million-square-foot expansion.

In commercial leasing, Gary Johnson, a senior vice president in retail properties at Alliance Commercial, notes that a lot of big new retail space came online this year, including Summit Sierra, additional retail at Damonte Ranch and an explosion of retail development at Spanish Springs.

"It's unusual to absorb all those stores in a single year," he says.

Nevertheless, vacant older big box spaces are starting to be absorbed, says Johnson. Demand then rises for small spaces in those centers because they need the foot traffic generated by the anchors.

In 2005 the market absorbed 700,000 square feet of space. This year, it absorbed even more. Next year, big projects such as the Legends development at Sparks are coming onto the market.

Despite all the activity, says Johnson, "I'm still busy with new site selection for tenants."

As housing and construction cool, he adds, the market might see some fallback in consumer spending, but retailers aren't seeing it yet.

At Colliers International says Rick Casazza, senior vice president retail services, "We see a very robust market through at least 2000."

That's despite the downturn in the housing market.

"Because retail lags 18 to 24 months behind rooftops, retail still needs a while to catch up to the growth," he says.

Rural Nevada may produce some of the strongest demand mainly Fernley and Dayton as these two areas are desperately lacking in retail services. "We look forward to a very strong year in 2007," Casazza says.

But Jim Hall, finance analyst for Washoe County, thinks retail spending could slow in 2007. That's a concern to the county because sales tax revenue contributes one-third of total county revenues.

Hall ran the numbers through a software package, Forecast Pro, which predicts this fiscal year will be $10 million below last fiscal year. "But the software may be pessimistic," he qualifies.

He's watching vehicle sales in particular, because that's the single biggest sales tax contributor.

"It dropped in March, then went negative over the summer," says Hall. "Auto sales dragged down the entire retail sector."

In 2007 retail will also be slowed by decelerating appreciation in the residential real estate market. He explains the past two years of double-digit retail growth by saying, "In past years, the house was the personal ATM."

The county official says retail sales could also be slowed if the migration of Californians to northern Nevada cools. Because when they move, they buy furniture and other big-ticket items for their new home.

And the lower headcount of workers in construction may portend fewer immigrants from other states at least in the near future. But not in the long term.

"The big bulge of Californians retiring is still in front of us over the next five years," Hall says.