Growing Sales, New Stores to Boost Retail Loans: Outlook

Originally published on August 24, 2021, by Michael Tucker for Mortgage Bankers Association.

Moody’s Investors Service, New York, said rebounding retail sales and new store openings should boost retail property loan performance.

The firm recently upgraded its one-year outlook for the performance of neighborhood, community, and strip shopping centers, noting retail sales have “rebounded” to above pre-pandemic levels and positive net new store openings this year. “The continued recovery of consumer spending at neighborhood, community, and strip shopping centers will extend support for retailers’ revenue and expansion plans, upholding credit quality for loans that underlie commercial mortgage-backed securities,” Moody’s said. “However, a still-elevated level of delinquencies and anemic property price growth poses risk to deals.”

But retailers face some challenges. Overall retail sector performance has improved since last year, but on Tuesday the Commerce Department reported retail sales fell more than 1 percent in July to $617.7 billion as consumers trimmed their spending. In addition, consumer sentiment currently stands at a 10-year low, the University of Michigan recently reported. The consumer sentiment reading fell from 81.2 in July to 70.2 this month.

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