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News release

Chicago

Jones Lang LaSalle’s Mid-Year Retail Outlook 2009:  Key Indicators Point to Gradual Economic Recovery Beginning First-Quarter 2010

Recovery will be gradual, “U-Shaped”; Consumer psychology shifts towards “value”


CHICAGO, AUG 20, 2009 — A combination of slowing job losses, heightened financial institution stability, housing sales increases, a better-than-projected GDP and improving consumer sentiment could be the catalyst needed to revitalize the retail industry beginning in the first quarter of 2010 following a bottoming of the current recession by the fourth quarter of 2009, according to Jones Lang LaSalle’s Mid-Year Retail Outlook for 2009.  These key indicators defy prevailing sentiment that economic conditions within the retail industry will remain negative, or even worsen.  Unlike previous recessions which saw a brisk, “V-shaped” recovery, existing data points to a more gradual, “U-shaped” recovery as vital indicators of economic conditions slowly stabilize, according to Jones Lang LaSalle, a market leader in retail sales, management and leasing.
 
“Because the speed and intensity of the recovery will largely be determined by consumer psychology and a willingness to spend, I envision true economic stability won’t take root until the first quarter of 2010,” said Greg Maloney, CEO and President of Jones Lang LaSalle Retail.  “Consumer confidence will play the biggest part in our return-to-normalcy and retailers that offer “value” options will be at the forefront of the recovery.”
 
Different Regions, Different Recoveries
 
Although the nation at large continues to suffer from the effects of the recession, it is clear that distinct geographic segments of the country have experienced different levels of intensity. On a micro level, the country can be separated into nine divisions (West South Central, New England, Mountain, West North Central, Middle Atlantic, East South Central, South Atlantic, Pacific, and East North Central), while on a macro level it is divided into four distinct regions (Northeast, South, West and Midwest) (see Figure 5).  Using a set of criteria that includes employment, gross metropolitan product (GMP), wages, housing price changes and unemployment, the West South Central Division stands out as the country’s strongest division, despite Louisiana’s adverse conditions. [1]  Each division and region has been assigned a ranking score where the lower the score, the better the overall performance.
 
Texas, in particular, is well equipped to emerge early from the recession, according to IHS Global Insight, an economic research firm.  The state has been “somewhat insulated” from the more serious effects of the recession due to its lack of a major housing bubble and its energy industry.  On a broader, regional level, the Northeast appears to be more advantageously poised for a recessionary breakout than the other three regions.  The South is also doing well, despite being negatively impacted by Florida, while the Midwest is weighed down by economic woes in the Detroit, Youngstown, Toledo and Dayton metro areas.
 
“Regional differences aside, the retailers and retail property owners that will prove successful in these turbulent times are the ones that stay flexible in a changing retail environment.  Those that place a value on traditional solid customer service, combined with current technology such as advanced logistics and social marketing, will be rewarded in the end,” said Kristin Mueller, Jones Lang LaSalle Director of Business Development.
 
Emerging Consumer Trends
 
New and old trends are emerging within the retail industry, as consumers have been motivated to reassess their priorities and change their buying behavior accordingly.  A key term among consumers is “value”— both as a measure of price consciousness and a return to core values such as environmental sustainability and the importance of family.  Consumers at every point in the income spectrum have embraced the value concept, but it remains to be seen if this “right-sizing” of consumption is a short-term phenomenon brought on by current economic conditions that will dissipate as the economy improves, or a longer-term fundamental shift in buyer behavior.   Many believe it demonstrates a more permanent shift in buyers’ attitudes and priorities—the effects of which will be seen for years to come.
 
“The rise of Costco, dollar stores, and other discounters as industry giants are definitely signaling the importance of value—in the form of bargains, sales and discounts—to consumers and retailers alike,” said John Bemis, Jones Lang LaSalle Director of Leasing and Development. “The Lexus in the Wal-Mart parking lot is no longer an anomaly as both upper- and lower-income shoppers seek to capitalize on lower prices and stretch their dollars further.”
 
Consumers are also eschewing labels and other “conspicuous consumption," in which even those who can afford luxury purchases are taking care not to be observed making them.  Another trend is a rise in experiential shopping as consumers look for an escape from the grueling realities of the current economic climate.  Retailers that offer do-it-yourself projects, small splurges and exceptional customer service and strong loyalty programs are also finding greater appeal with shoppers (see Figure 7).  The return of layaway, “Christmas in July” and social marketing have all become popular and valid tactics in reaching an increasingly discriminating consumer as well.
 
“Retailers that offer a significant value proposition to consumers are the ones that will survive—and thrive in the coming years.  We foresee unique opportunities for traditionally ‘B’ and ‘C’ centers to increase traffic to their locations and gain a stronger standing over time,” said Maloney.  “Retailers and centers that are flexible enough to shift their focus and strategies to meet consumers’ evolving needs are the ones who will have strong back-to-school and holiday sales—and will lead the way to recovery.”
 
About Jones Lang LaSalle
 
Jones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specializing in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2008 global revenue of $2.7 billion, Jones Lang LaSalle serves clients in 60 countries from 750 locations worldwide, including 180 corporate offices.  The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 1.4 billion square feet worldwide. LaSalle Investment Management, the company’s investment management business, is one of the world’s largest and most diverse in real estate with more than $36 billion of assets under management. For further information, please visit our Web site, www.joneslanglasalle.com.
 
[1] Sources:  August Partners, Brookings Institute