The "winter that wasn't" spit out one storm this month, albeit followed by rain and warm temperatures. Regardless, I joined a group on our annual ski pilgrimage to the White Mountains. We stayed in Jackson and skied at Attitash, Bear Notch, Great Glen and Wildcat.Driving up Route 16 through Conway and North Conway was underwhelming. There are so many empty, or near-empty, former outlet properties for sale. The former L.L. Bean site now has only a small chocolates store (ouch). L.L. Bean moved south, across from Burger King.In the interest of full disclosure, I did my part to boost retail sales in tax-free New Hampshire! The markdowns are incredible. A blue, lined L.L. Bean winter coat was marked $22.50! Oh, did I mention it was on the 50 percent off rack? This venue is an outlet store for L.L. Bean, but even so, the discounts are hard to fathom.From a real estate perspective, albeit a "drive-by," retail vacancy had to be 30 to 35 percent (maybe more). There are several factors, starting with the ongoing "Great Recession." Many retailers have retracted. Second, North Conway overbuilt and will take a long time to burn off the excess space. Third, intervening opportunities. The Tanger Tilton Outlet Mall is under new management and marketing and has made a bit of a bounce-back. This has been aided by Boston area day-trippers not ranging so far north. Fourth, the new outlet mall in Merrimack will capture more of the Massachusetts (and Rhode Island and Connecticut) shoppers. Fifth, rising gas prices.The inn we stayed in is struggling. The bartender said they hope to announce a sale in two weeks. The gift shop was nearly empty, with everything 30 percent off (not a good sign).Owning an inn in northern New Hampshire is not an easy undertaking in the best of times. Now entering the fourth year of the "Great Recession," coupled with a crummy winter, makes for a long winter and spring.I do admire the local business owners. They put on a wry grin and attempt to be upbeat. But as a professional real estate adviser, I know deferred maintenance when I see it, along with under-stocked shelves and lean staffing.Hard slog aheadNow that the Fed chairman has announced his policy of not raising the rates for two more years, many of our industry pundits talk about the third quarter of 2013 or the second quarter of 2014 as the turning point. That's a long time for small businesses struggling to meet payroll week after week.We still see significant underemployment. And the declining unemployment numbers are more attributable to people coming off the eligibility rolls than from net new jobs. I do not mean to be a curmudgeon here, but clearly we have a hard slog ahead of us.We see it every week. Every deal is hard. Lease negotiations go on and on. Sales of buildings are stressed by too few buyers, lean lending standards, and appraisals based on calculus with too few or no true comps.For every dark cloud there is a silver lining. There is plenty of capital to be lent -- alas, for the right deal. Good properties are becoming more affordable every month. The positive exception seems to be multi-family, which has not adjusted down much. The explanation for the robust pricing of apartments is that we all need a roof over our heads and the properties are still trading well below replacement cost.For commercial real estate, the pinch point is location and property type. Class A buildings in top-tier markets (Boston, New York City, Washington, Chicago, San Francisco) are sought after and are still trading at 5 percent to 6 percent cap rates. But when you leave these markets, only a few select properties are sought after.Retail centers in North Conway? Not so much.Bill Norton, president of Norton Asset Management, Manchester, is a Counselor of Real Estate (CRE) and a Fellow of the Royal Institution of Chartered Surveyors (FRICS). He can be reached at firstname.lastname@example.org.
This article appears in the March 23 2012 issue of New Hampshire Business Review