Thank you everyone who filled up our 1st webinar for CRE’s D12! One of our little quirks to make it a bit more interactive is to offer a free Catalyst or Flashpoint report for the first registrant that correctly guessed what our #1 CRE risk is. We have received some interesting guesses so far, so keep them coming!
One of the registrant’s guesses actually got me thinking a bit: Walmart. This is a pretty bold guess at first glance, as they tend to be viewed as the pinnacle of retail and transnational corporations in general.
In comparing corporations to the economies of actual sovereign states, Walmart ranked 28th in the world (higher than all other companies on the list), under Taiwan at 27th and above Austria, the next nation on the list at 32nd. (LINK)
So what could possibly make this gigantic behemoth a perceived risky CRE bet? I mean, the sweetest thing you can hear in the middle markets is “Walmart shadow anchored”. Could it be the rise of the now presumptive Republican presidential candidate Donald Trump?
Per this March 2016 Reuters article:
“The Republican presidential frontrunner’s campaign pledges to impose 45 percent tariffs on all imports from China and 35 percent on many goods from Mexico would spark financial market turmoil and possibly even a recession…” (LINK)
I’m not one to put too much credence in the words of politicians on the campaign trail, but what would this mean to national US retailers in general? Given the strength and expansiveness of the Walmart supply chain they more than likely could absorb any pricing shocks and still provide the comparative lowest prices in general (LINK) but what about the rest of American retail? We are already seeing some national chains like Sports Authority and Aeropostale close stores (or close down completely) and they were stacked to the brim with heavily marked up Chinese made merchandise. Media response also cited the newer “fastfashion” retail concepts like H&M and Forever 21, however strolling through those isles and looking at their proprietary brands reveals more than a few “Hecho en Mexico” tags on the collars. (LINK)
Also some of the more recent high profile nationals shuttering did not necessarily lead to smashing sales success of their former competitors (i.e. Circuit City, Borders, etc.;LINK) likely due to the lower costs of online retail vs. brick & mortar competition.
What are your thoughts on this? Is there cause for concern? Should we just brush this off as another whopper like “If you like your doctor you can keep your doctor.”? Should we keep on compressing those cap rates, pushing those leverages, laugh in the face of cotenancy clauses and buy an extra bottle of Ciroc at Marquee this year during ICSC RECON? (LINK)